Ford
- Ford is asking suppliers for cost-cutting ideas.
- Ford and other major automakers still lose billions of dollars on EVs.
- The auto industry is adjusting to a new wave of EV customers.
Ford sent a memo to its electric-vehicle parts suppliers this week asking them to help come up with ways to cut EV manufacturing costs.
In the "call to action" memo, first reported by Crain's Detroit Business, Ford asked its suppliers to work with the company on cost-cutting measures that can bring about much-needed affordability in the electric-vehicle market.
This request to suppliers is the latest in a series of strategy shifts that car companies have employed since the EV market hit a slowdown last year. Ford and its legacy competitors are still losing money on EV sales, a problem the industry was hoping to address as it moved more vehicles in the coming years.
But EV supply out of Detroit is at odds with consumer demand, hurting sales and profitability.
Ford is one of the only auto companies that's announced the results of its EV business; it reported $4.7 billion in losses for the division in 2023 and has said it's on track to lose another $5.5 billion this year. At the same time, the automaker has been forced to slash prices on its electric cars and slow production as customers tighten purse strings and Elon Musk's Tesla wages a price war.
Reports have said the memo sent to suppliers is broad and asks for cost-reduction proposals related to current and future electric vehicles, including the Mustang Mach-E, the Ford F-150 Lightning, a future unnamed electric pickup, and a future large SUV.
"We need your best ideas to drive cost reduction, even if they have been previously rejected by Ford," Liz Door, Ford's chief supply-chain officer, reportedly wrote in the memo. "We have all invested heavily in the success of the EV business, and we will all win or lose together."
A Ford spokesperson told Business Insider the company remains "focused on delivering affordable electric vehicles to our customers and building a profitable EV business."
"We value our suppliers' collaboration and asked them to share their ideas for cost reductions," they said.
The EV market is changing
Ford and other major automakers, including Tesla, are struggling to meet the demands of a new crop of electric-vehicle customers who have come to dominate the segment. These shoppers tend to be more practical, frugal, and more likely to consider all options when deciding between an electric, hybrid, or gas-powered vehicle.
In these matchups, hybrids have been winning lately, a phenomenon that Musk has said is detrimental to the electric-vehicle market. Industry experts, however, say hybrids are a good bridge technology for future EV adopters.
Ford is leaning more heavily on its hybrid lineup, which has notched impressive sales since the start of the year. Crosstown rival GM, which previously planned to skip hybrids, has reversed course and is planning to bring hybrid models to North America in the near future.
That doesn't mean these companies are throwing in the towel on electric cars, though. While companies like Ford and GM fall back on hybrid and gas-powered profits to offset the billions of dollars in EV investment, it's likely that we'' see more cross-industry collaboration to lower the overall costs of electric-car manufacturing.