It’s early in the EV game and traditional automakers are trying to figure out what their strategy should be. No one has figured out a winning formula yet and their strategies keep evolving.
But they all know one thing: Tesla is way out in front and they’d better figure out a way to catch up fast.
The EV business is expensive and capital intensive. Even the largest OEMs are struggling to play the game. Small automakers are partnering with big ones, such as Aston Martin going with Mercedes.
And midsize OEMs are merging to become bigger players, for example PSA and FCA. This is also why some giant OEMs are hedging their bets by partnering with startups – GM with Nikola, Ford with Rivian.
The EV market is evolving faster than the traditional OEMs expected. “Compliance” cars seemed like such a simple strategy to satisfy government regulations for zero-emission vehicles until Tesla blew that strategy to smithereens.
It created EVs that people were eager to buy and suddenly compliance cars became sales-proof. Today, if an OEM doesn’t show up with a serious EV, it doesn’t stand a chance.
Yet the traditional car companies are reluctant to let go of their sunk investment in platforms and plants that were designed for an internal-combustion era. You can’t really blame them, but that strategy is unlikely to succeed.
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Mercedes is going to make its EQS electric flagship in the same plant as its traditional S-Class. BMW is retooling its plants so it can build ICEs, PHEVs and BEVs on the same lines. Ford is going to take the existing F-150 and stuff it full of batteries.Here’s the problem with those approaches. If you dedicate an assembly plant to making only EVs, you can get rid of 20-25% of the labor content.
So plants that make both ICE and battery-electric cars will have lower productivity. And an ICE platform that is converted into an EV platform presents too many compromises. Getting the maximum driving range and performance with an EV is all about developing a dedicated platform for electric propulsion.
Using existing facilities and platforms saves a lot of money upfront, but it means you’ll be facing competitors with more efficient products made in more efficient plants.
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Traditional OEMs also are struggling with make-versus-buy decisions. Should they make EV components in-house or buy them from suppliers?
Tesla, of course, is trying to be as vertically integrated as possible. General Motors is in hot pursuit. It’s going to make almost all its EV components in-house, including the battery cells – in partnership with LG Chem. Ford originally said it would buy batteries, but now it’s talking about making cells in-house. As automakers see EV sales volume growing, their make-versus-buy strategies are starting to lean more toward make.
Since none of the OEMs have the resources to play every EV angle, they’re choosing strategies that play to their strengths. Let’s look at three of those strategies from FCA, Ford and General Motors:
FCA knows it can’t afford to develop a lineup of EVs on its own. So it’s going to wait for the PSA merger and become a fast follower. That’s a solid strategy. Even though EV sales are growing fast, it will be another three or four years before the segment really gains speed. So Stellantis (the new name for PSA-FCA) has the time to develop a lineup of electrics to arrive just as the market really starts to embrace EVs.
Ford is extremely powerful in the commercial-vehicle segment, and so it’s building an EV strategy around that. While the Mustang Mach-E is getting all the headlines, look for electric Transits and F-150s to be the real workhorses of Ford’s EV efforts. Fleet owners pay close attention to the total cost of ownership, and they will happily pay more for EVs knowing they’ll more than make that back in fuel and maintenance savings.
General Motors dominates the fullsize SUV segment so that’s where it’s placing its EV bets. Those SUVs already are expensive, so GM can price its electric SUVs to make a profit without risking a price pushback from customers.
And to put some icing on the cake, Honda will even have GM make EVs for it, built off GM’s Ultium platform. That’s a smart strategy for Honda that gets it in the game more quickly at a lower cost.
So many OEMs, so many different strategies. To use a baseball analogy, the EV market is in the bottom of the first inning.
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We’re very early in the game and no one knows how the game will go. But two lessons have emerged so far: Keep your EV strategy flexible and agile, because things are going to change.And make sure you play to your strengths.
John McElroy (pictured above, left) is editorial director of Blue Sky Productions and producer of “Autoline Detroit” for WTVS-Channel 56, Detroit.
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