Ford isn’t experimenting with autonomous cars and shared-mobility strategies simply to keep pace with industry disruptors and raise its profile on Wall Street, CEO Mark Fields says. It sees near-term, high-margin profit potential in such ventures.
In fact, Fields says the automaker is evolving out of its One Ford strategy, engineered by former CEO Alan Mulally and credited with guiding the company through the 2009 Great Recession, in order to take the next step toward these new business realities.
“Our One Ford strategy has really served us well,” Fields tells financial analysts Wednesday during an investors’ backgrounder at its Dearborn, MI, campus. “It’s very foundational for the company. But at the same time, as we look at changing consumer attitudes, we look at technology, we look at a lot of the emerging-business models, it is really moving us to evolve our strategy and to change our thinking.
“We know the world is moving from a mindset of owning vehicles to owning them and sharing them,” Fields adds. “And we’re viewing these not as separate businesses, but interconnected businesses, because you can’t have mobility services without having core products.
“So it’s not about (Ford) moving from an old business to a new business, it’s about moving to a bigger business.”
Fields is targeting 8% operating margins in Ford’s core sector of manufacturing cars and trucks, but closer to 20% returns from the emerging-business operations that will be built on such trends as autonomous vehicles and mobility services.
Driverless cars will be within reach of average consumers by the mid-2020s, Fields predicts, promising to put “autonomous vehicles on the road for millions of people, not just those who can afford luxury cars.
“We believe the next decade is going to be defined by the automation of the automobile,” Fields said earlier this week at the automaker’s “Further With Ford” emerging-technologies forum. “In fact, we see autonomous vehicles as having as significant an impact on society as Ford’s moving assembly line did more than 100 years ago.”
Ford is pushing hard to be among the first with autonomous vehicles, reiterating its pledge to deliver Level 4 (no steering wheel or pedals) self-driving cars – “in high volume,” meaning more than 100,000 vehicles annually – to ride-sharing services in 2021. The automaker says it already has been contacted by some fleets expressing interest in converting to autonomous vehicles as soon as they become available.
Making Move on Mobility
The automaker’s new-mobility play already is well under way too, centered on moving Ford toward the fleet-management and service sectors, which Raj Nair, executive vice president-product development and chief technology officer, describes as huge opportunities for the automaker.
Last week Ford announced it is teaming up in San Francisco with Motivate to expand its bike-sharing program from 700 bikes to 7,000 by 2018. Ford also acquired Chariot, a crowd-sourced ride-sharing service in San Francisco that will be expanded to five additional markets within the next 18 months.
Both the Motivate bikes and Chariot vans have onboard telemetry, allowing Ford to collect data on where people go and how they use the services, ultimately allowing the automaker to potentially engineer a transportation network optimized for both cost and convenience.
Within Ford a dedicated team called City Solutions has been established to work with additional municipalities worldwide on similar programs to solve transportation and traffic-congestion issues.
Last month the automaker announced it would take a $75 million stake in supplier Velodyne, which makes Lidar sensors – a critical piece in future autonomous-vehicle technology. It also revealed it planned to double the size of its 18-month-old Palo Alto advanced-technology R&D center by the end of next year.
“The reason we’re in Palo Alto is there is so much going on in Palo Alto,” Nair says. “We felt we just can’t be a scout out there. You really need to be part of that ecosystem and be seen as part of that community, a valued player in that community that brings just as much as it receives out there.”
Ford is moving quickly to get automated vehicles into ride-hailing fleets because it sees huge market potential and a near-term profit opportunity.
“When you take the driver out, you take the cost out of a ride-hailing service,” Fields says. “(The driver is) why ride-hailing services aren’t making any money.”
Asked if taxi-substitute Uber’s rapid rise took Ford by surprise, Nair says, “Yeah, we were all surprised how quickly that came on. Certainly the valuations of those businesses surprised us (and) more importantly the customer acceptance of that type of model.
“And when we look at the economics of that model, when we look at what autonomous vehicles can do to improve the economics of that model, that’s a game-changing thought.”
Nair says autonomous technology could cut car-hire costs from $2.50 per mile today to $1 per mile.
Overall, Ford says it sees a market potential of $100 billion-$200 billion around dynamic shuttle services in the 2025-2030 timeframe. Offering vehicle management as a service could be a $100 billion-$400 billion sector by then and connected and telematics services could represent a $25 billion-$30 billion industry. Ford also sees potential in offering financial services around these emerging technologies, though it doesn’t peg the size of the market.
Fields believes the century-old Ford has some advantages over much younger, so-called disruptor firms such as Google, Apple and other Silicon Valley upstarts, citing the automaker’s decade-long autonomous-vehicle development work, experience in volume production and its financial services arm and dealer network that can help facilitate sales.
“At the same time, I think the thing that’s underestimated by a lot of folks, is the systems integration (expertise needed),” he adds. “We are the ultimate systems integrator. For years we’ve integrated hardware technology (with) software technology and made them work seamlessly. And that’s really important going forward.”
Ford plans to maximize its resources by developing core product platforms around connectivity, financial services, autonomy and data and vehicle management that will underpin both its legacy vehicle-owning and emerging vehicle-sharing businesses. Fields equates the strategy to the one used on the manufacturing side, where a single vehicle architecture is engineered as the basis for a variety of cars and trucks.
Ford officials forecast “even in an aggressive model” only 20% of vehicles will be automated 10 years from now, but that means by 2030, one in every 10 miles (16 km) driven will be by autonomous vehicles, translating to one in every five vehicles sold.
“Being a first mover is a big advantage,” Fields says of the race under way to get autonomous vehicles to market. “Being in the forefront is important.
“We may not be the (absolute) first, but when we do come out with it we want to make sure it's accessible to millions.”
[email protected] @DavidZoia
