Ford Model e COO: 'We don't have a future' if EV market lost to Chinese automakers

Detroit — The chief operating officer of Ford Motor Co.'s electric-vehicle division said Wednesday the development of EVs is more than just about environmental concerns — it's a hedge against the potential threat of Chinese automakers in the United States.

"That's coming here eventually," Marin Gjaja, Ford Model e's COO, said during a panel on disruptive technology held by the automaker. "So, we better get fit now and better get going on EVs, or we don't have a future."

Chinese automakers are dominating their domestic market, making inroads in Europe, and setting up shop in Mexico with eyes on the United States. They led the way in introducing less-expensive EV battery chemistries, and subsidized material prices have helped them to provide low-priced vehicles. The BYD Seagull EV city car starts at roughly $11,000 (78,800 yuan).

“I don't know exactly the timing, but I think they're going to end up here,” Gjaja said, “just as the Japanese ended up here. The Koreans ended up here. The Germans ended up here. It's a big market.”

Traditional automakers have seen their share of the Chinese luxury market fall from 60% to less than 5%, Gjaja said: “It’s not that they haven’t tried to introduce EVs. They’re just that are far behind. … That’s the scale of the disruption.”

EVs in China represent nearly a quarter of its new-car market — close to 7 million vehicles, about 60% of EVs in the world. The United States’ adoption is less than 8%.

“The size of the market in China is so big that those players are going to be in a position to go potentially dominate the world, unless we as Ford and other OEMs can respond,” Gjaja said. “Think about all of the capital: the human capital, physical capital, financial capital that’s built into these ecosystems to build vehicles — that is all being massively disrupted, because this technology is progressing so fast.”

Ford understands this: It’s partnered with Chinese battery maker Contemporary Amperex Technology Co. Ltd. to license its technology to make those lower-cost batteries with lithium-iron-phosphate chemistry in south-central Michigan’s Marshall.

Ford CEO Jim Farley last week during an earnings call also discussed a low-cost EV platform the Dearborn automaker has been developing for the past two years in hopes of having the flexibility to offer affordable options. Gjaja declined to detail timing on that, but says the goal is a sticker tag in the $25,000 to $30,000 range. With the $7,500 federal subsidy, that would bring the total price closer to $20,000.

“We look at the market, and you look at the scale that's required, and the installed base that you get with smaller vehicles, which are going to be where the fastest growth and adoption of EVs will be,” he said, “we need an affordable vehicle platform to be able to compete.”

In addition to EV affordability, the industry also is seeing hesitation because of insufficient public chargers, charging speeds and grid reliability concerns, which Gjaja dismissed.

Bernstein analyst Toni Sacconaghi said that based on the adoption curve of other technologies historically, hitting 1% population adoption is when there begins to be a faster uptake rate.

“Typically, what you need is some combination of a reasonable price point, and advanced functionality,” Sacconaghi said. “What we've observed is ... in a new product's evolution, once a product is sort of sufficiently attractive on a price and feature set that it commands 1% penetration, going from 1% to 80% happens really quickly.”

Gjaja said given the capital investment required for vehicles and based on results in other countries, he believes for EVs that the tipping point is closer to 10% of new-vehicle sales, though that still represents a drop in the bucket compared with total vehicles on the road. The adoption also depends on region. The San Francisco Bay Area adoption is around 40%, while North Dakota’s is 1%.

“There’s not a magic number, if you look across the geographies,” he said. “But I personally feel like at 10%, you’re hitting critical mass where people are like, ‘Oh, I see these charging stations.’ There are enough people buying.”

bnoble@detroitnews.com

@BreanaCNoble