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Ford CEO expects to see industry consolidation as the costs of transition to electric vehicles rise

Ford CEO expects to see industry consolidation as the costs of transition to electric vehicles rise

In the years ahead, Jim Farley, CEO of Ford Motor Company, anticipates the auto industry’s continuous shift to electric vehicles to compel considerable consolidation among automakers and suppliers.

The large sums of capital required to invest in the technology, according to Farley, will compel smaller companies to be purchased, putting pressure on new electric-vehicle start-ups that are already struggling due to a lack of funding.

In contrast to the partnerships and joint ventures that are more popular today, he believes there will be more acquisitions. “Absolutely, legacy automakers and suppliers will get integrated,” he predicted.

“There will be some huge winners, some who will transition and others who will not.” Many small businesses cannot afford to make this shift,” Farley remarked at the Bernstein 38th annual Strategic Decisions Conference on Wednesday.

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Chinese automakers around the corner

Farley believes that Chinese electric vehicle companies will have a competitive advantage over their American counterparts.

“I believe that there will be a shakeout, and I believe that the shakeout will favor many of the Chinese new players,” he stated, without mentioning any start-ups. Nio, XPeng, and Li Auto are among China’s most well-known electric vehicle manufacturers.

Farley did point to China’s best-selling Hongguang Mini EV, which is built through a joint venture between GM and Chinese manufacturers SAIC and Wuling, as an example of a car that is inexpensive to create but popular with consumers.

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Ford and other traditional automakers will have to decrease expenses in order to make EVs more accessible while remaining profitable.

Ford believes that Tesla’s direct-to-consumer sales approach costs $2,000 less than selling through franchised dealers, according to Farley. Farley has advocated for buyers to order new vehicles and trucks directly from the manufacturer rather than through a dealer’s lot.

No Super Bowl ads

Farley, who formerly served as Ford’s chief marketing officer, also attacked the company’s marketing budget. He added he’s not certain traditional marketing is necessary if Ford runs its EV company effectively, a nod to Tesla’s marketing strategy.

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He believes that money would be better spent on incentives and car upgrades to keep customers. He gave the example of an EV’s “birthday,” which would entail a car cleaning and other tests.

“Instead of Super Bowl advertisements, we should be doing stuff like that,” he remarked. “Sell the shares if you ever see Ford Motor Company running a Super Bowl ad on our electric automobiles.”

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