You mentioned investing in electrified components. Ford CEO Jim Farley says building cells is a possibility. What EV product could you make in Europe?
The most challenging thing is picking our way through as ICE [internal combustion engine] volumes decline and EV volumes ramp up. Historically, we haven't been in the battery cell business. However, we need to decide whether we want to be in a full cell relationship or whether we want to partner with other companies. There are also components such as e-transaxles. We built e-transaxles in America for the Mach-E. They are going to go into the electrified Transit [commercial van]. We have a point of view on some of those [e-components] while others still need to be worked through. We are a volume player in Europe so having a localized production base helps us be competitive.
Are battery cells from VW part of the deal or will they come from another supplier?
We will purchase the battery pack as part of the agreement with Volkswagen.
Your plant in Dagenham, England, makes diesels. What could you make there to adapt the factory to the electrified age?
We built three diesel engines there. The majority of those are going into commercial vehicles, primarily the Transit, so that gives a longer runway. When you look a decade out, we will still be selling a lot of diesel engines from Dagenham. It is still a very important part of our future commercial vehicle business.
What type of vehicles are most likely to become plug-in hybrids by 2026?
Plug-in hybrid is 50 percent of demand for the Kuga, and it's good business as well, not a compliance play. I think plug-in hybrids are going to be an important part of the mix in the next 10 years as people transition [to EVs] and the charging infrastructure is built out. Today, plug-in hybrids are mainly in midsize and large cars, which makes sense give there is a certain amount of cost that comes with having both the electric and combustion drivetrains.
Ford plans to move to an agency model for dealers starting with the Mach-E. How will that change the role your dealers play?
Dealers are and will remain a critical part of our business model and our distribution. We are now working in partnership with our dealers to build out their online purchase capabilities. With the Mach-E, you can order and pay for the vehicle online. We think that's going to be important to our customers, but having dealers available to service the product is also important.
That calls for a different relationship with dealers than with the wholesale model, right?
Yeah, but you are going to see us reduce the complexity of our product offer. You are also going to see more and more customer-order vehicles [as opposed to buying from dealer stock], and more customers ordering online.
The lockdown last spring forced the industry to work with small inventories and put a greater emphasis on customer-order vehicles. Will Ford continue along that path of reduced dealer stock?
Definitely. I think running our business leaner is an opportunity for our dealers and our customers. We were somewhat forced into a leaner inventory, but we should leverage the opportunity. Reduced complexity on the Puma, as well as the Mach-E, is the magic ingredient to facilitate a leaner inventory, faster orders and delivery and really aligning the production offer with customer choice.
What is a good example of reduced complexity with the Puma?
If you compare the Puma with the Focus, we are talking logarithmic scale differences in the complexity behind those vehicle lines [when it comes to their powertrain and trim-level combinations]. That simplifies the business from the supply base to the manufacturing plants to the logistics to the customer-facing offer. If you compare the Mach-E to the Puma it's the next level of efficiency.
What is your forecast for demand for when showrooms reopen in the UK and Germany?
Our two largest markets are currently operating on click and collect [order online and pick it up at the dealership]. The dealers have done a tremendous job, but demand is depressed. In Germany and UK, the dealers are not allowed to offer test drives, which is something many customers still want. That being said, last year the industry came back quicker than we anticipated in June and July. I think we are going to see that again. We will see strong demand when dealerships reopen.