When Henry Ford launched the Mannequin T in 1908, he began a producing revolution.
The transferring meeting line minimize manufacturing time on the auto from 12 hours to solely 90 minutes. It slashed prices and made automobiles inexpensive for on a regular basis Individuals.
This single innovation turned Ford into the biggest automaker on earth, and it made Detroit the commercial capital of the world.
It additionally made mass manufacturing the engine of the trendy financial system.
Immediately, Ford (NYSE: F) is making an attempt one other manufacturing revolution. However this time, the stakes are even larger.
You see, Henry Ford was competing towards an previous expertise within the horse and buggy.
However the fashionable Ford firm is getting ready to outlive the approaching flood of low cost Chinese language EVs.
A Modular Wager
Final week, Ford revealed it has developed a brand new “common EV platform.”
This modular system may very well be simply as revolutionary because the meeting line was over a century in the past.
As an alternative of bolting collectively 1000’s of distinctive components in a single steady line, Ford will construct the entrance, center and rear sections of a automobile individually, then fuse all of them collectively.
By the corporate’s personal estimates, this may minimize meeting time by 40%. It’ll additionally scale back components by 20% and minimize fasteners by practically a 3rd.
And in an business the place margins are razor skinny, these numbers are merely astounding.
The primary automobile to roll off this method might be a midsize electrical pickup, slated for 2027.
And from the specs I’ve seen, it appears like a contemporary technological marvel.
The truck’s flooring is a lithium-iron-phosphate battery pack that doubles because the automobile’s structural base. That design saves weight, lowers prices and opens up extra cabin area.
And identical to the Mannequin T, will probably be inexpensive to the employees who make it.
Proper now, its beginning value is pegged at round $30,000, which ought to come as a shock for anybody who has priced a midsize truck currently.
Particularly because it’s an EV.
However there’s no mistaking the motivation behind Ford’s radical shift to this new modular system.
We’ve talked earlier than about BYD, China’s EV juggernaut. It’s already promoting electrical automobiles in Europe for below €20,000, which is lower than half the worth of most U.S. EVs.
Final yr, BYD overtook Tesla because the world’s largest EV maker. However not like American rivals Ford and GM, BYD’s revenue margins are unimaginable.
Some estimates put its per-car revenue in Europe at $14,000. And if these economics could make it to the U.S., Detroit might be in actual hassle.
That’s why Ford is betting on a second manufacturing revolution.
If this modular system works, it may mark the primary time an American automaker can promote an EV at a mass-market value and nonetheless become profitable on it.
In spite of everything, Ford’s EV division has been bleeding crimson ink.
Final quarter alone it posted a $1.3 billion loss. That works out to roughly $22,000 misplaced on each EV the corporate bought.
Since 2023, Ford has hit $12 billion in cumulative losses.
And Wall Road is effectively conscious of this. That’s why Ford’s inventory barely budged after the announcement.
Analysts are nonetheless break up on whether or not this modular pivot is a stroke of genius or a determined transfer to cease the bleeding.
After all, Ford isn’t the one U.S. firm with the plan to go modular.
Startups like Slate — which raised $111 million from 16 buyers, together with Jeff Bezos, in its preliminary funding spherical — are pushing modular ideas of their very own.
Slate’s pitch is a bare-bones pickup within the mid-$20,000 vary, designed to be wrapped and customised like a clean canvas.
Supply: slate.auto/en
Consumers don’t get paint. They don’t even get energy home windows.
However they do get affordability and suppleness.
Then there’s REE Automotive, which is specializing in a modular chassis for business EV fleets.
And you may be certain GM and Stellantis (previously Dodge/Chrysler) are engaged on their very own scalable architectures behind the scenes.
However Ford might need the largest benefit. It simply spent $2 billion retooling its plant in Louisville to accommodate this new modular system.
Now it comes all the way down to execution.
In 1908, Ford gained an edge by constructing automobiles sooner and cheaper than anybody else.
In 2027, the trendy Ford firm may acquire an edge by having the ability to construct its EVs profitably when its U.S. rivals can’t.
That makes this story about extra than simply auto manufacturing.
I famous how Musk’s latest $16.5 billion wager on chipmaking capability is a part of an American industrial reset.
Ford’s transfer is one other clear instance of this reset.
The widespread thread is that U.S. corporations know they will’t cede core applied sciences to China with out risking their future.
So that they’re making huge, daring strikes to make sure that doesn’t occur.
Right here’s My Take
The trendy Ford firm is attempting to do with modular EVs what Henry Ford did with the meeting line…
Use a producing innovation to alter the economics of a complete business.
Frankly, I believe it’s a daring transfer. If this modular system truly delivers, Ford gained’t want tariffs or subsidies to compete.
It may promote a $30,000 truck in America and really flip a revenue. And that’s one thing no U.S. automaker has achieved but in EVs.
Which is a part of the rationale U.S. buyers have largely written off the EV commerce.
I imagine that’s a mistake.
Our Strategic Fortunes and Excessive Fortunes mannequin portfolios maintain various corporations with EV publicity. These shares are buying and selling close to cycle lows, and I imagine they’ll come again into the highlight as the worth of EVs continues to drop.
There’s additionally the robotics angle on every of those corporations as a result of robots use comparable energy and sensing chips.
However we’ll depart that for an additional dialogue.
By 2027, we must always have a good suggestion of whether or not Ford’s gamble will repay.
If the corporate can ship a mid-size electrical truck that turns a revenue, it most likely gained’t stage the enjoying area with BYD…
Nevertheless it may assist kickstart a brand new manufacturing revolution right here within the U.S.
Regards,
Ian KingChief Strategist, Banyan Hill Publishing
Editor’s Be aware: We’d love to listen to from you!
If you wish to share your ideas or recommendations concerning the Day by day Disruptor, or if there are any particular matters you’d like us to cowl, simply ship an e mail to dailydisruptor@banyanhill.com.
Don’t fear, we gained’t reveal your full identify within the occasion we publish a response. So be happy to remark away!
