For Ford’s car-racing CEO, a humble van looms large4 min read . Updated: 13 Nov 2020, 12:04 PM IST
- Auto maker’s Jim Farley sees an edge in selling electric, connected vehicles to businesses
A racer of vintage cars, Jim Farley has spent his first few weeks as Ford Motor Co.’s chief executive thinking about one of the company’s more utilitarian models: a cargo van.
Ford is planning an electric version of the Transit, the top-selling U.S. van, used by plumbers, delivery companies and other businesses. Set to go on sale next year, the vehicle highlights two pillars of Mr. Farley’s growth strategy: extend Ford’s lead in commercial vehicles and add new subscription services that will generate profit after the sale.
“We see these new digital capabilities with electric vehicles as a huge growth area for our revenue and our relationship with the customer," said Mr. Farley, who took over on Oct. 1 from the retired Jim Hackett.
Ford released details of the electric Transit van on Thursday, including a starting price around $45,000 that Mr. Farley expects will entice business buyers looking to save on fuel costs.
Mr. Farley says electric cars are likely to catch on more quickly among commercial customers, who are motivated to clamp down on operating costs. The electric Transit’s maintenance costs over an eight-year span will be about 40% lower than those of a gasoline-powered model because it doesn’t require upkeep such as oil changes, Ford said.
Most major auto makers are hurrying to add electric vehicles to their lineups, driven by tightening environmental regulations globally and Tesla Inc.’s rapid sales growth. The electrical wiring used in most battery-powered cars also is enhancing their ability to remotely add new features, a capability that has aided Tesla success.
Ford is betting new services that help business customers track and manage their electric fleets will help ease the transition to plug-in vans.
Owners of the electric Transits will be able to remotely check how much juice each van has left, for example, or preprogram the vehicles to recharge when electric rates are lower. The vehicles also will include what is known as a driver-coaching feature, which uses voice commands to scold the driver for exceeding the speed limit or leaving the van idling too long.
Ted Cannis, head of Ford’s commercial-vehicle business in North America, said the system is the modern-day version of the bumper stickers that many fleet operators affix to their trucks and vans asking others to report if their drivers are misbehaving.
Businesses “are worried about collisions that take their vehicles out of service. That means they can’t make money and have a lot of ticked-off customers," he said.
Boosting Ford’s strong commercial business is among the top priorities for Mr. Farley, who says he races cars to relax, including a 1965 Ford GT40. He takes over a company that has slipped further behind chief rival General Motors Co. in profitability, and under Mr. Hackett had been struggling to articulate a detailed turnaround plan to Wall Street.
Ford’s shares have rallied in recent months, though, and Wall Street analysts generally have praised the choice of Mr. Farley to lead the nation’s No. 2 auto maker by sales, after GM.
“We believe new CEO Jim Farley will drive incremental urgency and accountability at Ford," Credit Suisse analyst Dan Levy said in an investor note last week.
Still, the valuations of Ford, GM and other traditional car companies have lagged behind when compared with Tesla and electric-car upstarts such as NIO Ltd. of China. Auto makers are under pressure to show they can stay ahead of the startups by pivoting from being purely manufacturers to providers of services for which customers are willing to pay extra, said Sam Abuelsamid, an analyst at Guidehouse Insights.
“Commercial customers are more likely to pay for those types of services if they see them as helping run the business more efficiently," he said.
Ford’s monthly charge for commercial customers to use its digital fleet-management service today costs $20-$25 a vehicle. It could offer subscription-based add-ons as more features are offered, a spokesman for the company said.
The importance of services to help commercial customers struck Mr. Farley about five years ago, when he was running Ford’s European division. He arrived at a meeting eager to talk up fuel economy and other features of Ford’s vans. The roomful of customers instead wanted to talk about digital add-ons that could help them manage their fleets and drivers.
“I was like the old-school car guy asking them boring questions about the vehicle," Mr. Farley recalled. “That was a lightbulb moment. I thought, ‘They like the data more than the vehicle. The vehicle is just a box.’ "
Mr. Farley’s focus on data and services is evident in his new hires. He brought in an executive from farm-equipment maker Deere & Co., Alex Purdy, who had helped Deere use artificial intelligence to develop new services for farmers.
He also recently recruited a retired colonel from Israeli military intelligence, Gil Gur Arie, to serve as Ford’s data and analytics chief. Last week, he hired TD Ameritrade Holding Corp.’s chief information officer, Vijay Sankaran, as Ford’s chief software and information officer.
Car makers have struggled to translate the growing amount of data coming from connected cars into services that consumers view as valuable, said Roger Lanctot, a director at consulting firm Strategy Analytics. Some have introduced voice-enabled digital assistants such as Amazon.com Inc.’s Alexa, but often that hurts their ability to fully monetize the service, he said.
“The industry has a lot of work to do," Mr. Lanctot said.
This story has been published from a wire agency feed without modifications to the text