The company has big plans for its electric F-150.
October 5, 2021
The 7investing team often has very spirited discussions on our Slack channel. From time to time we’re going to share those debates in the form of an article. The text below has been edited for clarity and to remove unrelated posts.
Matthew Cochrane: Is this a lot? Honest question. [Quoting from a Ford press release]
With 150,000 reservations for F-150 Lightning to date, Ford is investing an additional $250 million and adding 450 more direct jobs across three southeast Michigan facilities…
Steve Symington: I mean, yeah? Total EVs sold in the U.S. were something like 310K in the first half of 2021.
But we should also keep in mind Tesla has >1 million Cybertruck reservations already (and reached 250K within 1 week of its announcement).
Ford’s ability to actually fill those pre-orders is certainly greater, though.
Steve Symington Also interesting…Ford says the investment and added jobs will “help increase production capacity to 80,000 trucks a year.”
Dan Kline Tesla reservations are $1,000. What are Ford’s?
Steve Symington Oooh, actually weren’t Tesla’s only like $100 at first?
Ford’s are $100. And refundable:
Maxx Chatsko The fact that Ford has any reservations is [impressive]. Ford sells vehicles on the lot. Tesla sells vehicles online. The comparison of reservations is apples and oranges.
Ford sells:
If Ford can convert the F-150 enthusiasts into EV owners, then that’s really, really important. This is why the F-150 Lightning is the most important EV in the US measured by decarbonization efforts. It’s a gauge on how quickly we’re going to electrify transportation.
Steve Symington This is true
Anirban Mahanti Ah sigh, so much about Lightning [F-150] when there’s nothing electric about it. I hold the view that Ford & GM are basically doomed. I think Rivian will do really well. If they get their production going they will smoke Ford.
Plus have you not seen the GM Bolt news? They have to park their burn potential vehicles 50 m from anything else.
Maxx Chatsko I think the oversight is that not every truck owner in the U.S. wants a truck that can become a camper/boat/spaceship and looks like a doorstop. They just want a truck.
I would rank Rivian ahead of the Cybertruck though, but still behind Ford.
Anirban Mahanti I think the real issue is — Ford & GM really have no credible pathway to surviving. They have no battery cost advantage. They don’t have a half-decent BMS. And they don’t have a charging network. While the end state is ubiquitous charging, great BMS and all, b/w now and then, these ICE folks are going to be toast.
I think the Tesla advantages are underrated and misunderstood. That’s fine … but I would expect a fair few traditional ICE makers to go bust.
It is fascinating that we still debate about whether or not Tesla is smoking the competition. That’s great in its own way. I love it!
Maxx Chatsko This is all fascinating stuff!
My read is that Tesla has leading battery advantages (for now) and one of the leading charging networks because it had to. That was the only path to survival for Tesla. How important will that be in 2025 or 2030 when those things are commonplace? Charging will happen at home thanks to electric utilities owning the infrastructure, markets will form for distance charging, and battery tech continues to make leaps and bounds.
I would agree that some of the existing autos could bite the dust, but most will make the transition. As [7investing research source] eloquently pointed out, there’s the tech vs. scale perspective. Legacy autos have scale, Tesla + newcomers have tech. The two are likely to converge in the future.
I just don’t take the all-or-nothing approach. Cars aren’t the same as the walled gardens of tech — there’s joules, bits, AND atoms. There will be many winners.
Anirban Mahanti Maxx, I think point 2 is a big flaw. Do you think the leader stops innovating?
Winners keep winning for a long time.
It’s a virtuous loop.
Maxx Chatsko Listen, I’m a Pittsburgh Pirates fan. We won a lot in the 1970s, then abruptly stopped. Winners don’t keep winning forever.
Plus, again, this isn’t the same as tech. The capital requirements are different, right?
Anirban Mahanti I will stop trying to convince you. But I think winners in general expand their moats over time. They fade at some point. But it takes decades.
And no two models are alike.
Maxx Chatsko Tesla is also making some daring bets in batteries that might not pay off. New cell architecture can only take you so far, what happens when new chemistry or new modalities come into play? Tesla has to retool existing factories when all the newcomers (legacy autos) get to build those advantages from scratch.
Anirban Mahanti I think again Maxx you are just looking at the negative side, right? If there’s a new cell architecture that is feasible the odds that they pass on it and other have it is pretty low. They are the leaders in battery consumption.
If you want to work on new cell tech, the best folks probably are heading to Tesla. Same story with AI. Or hardware design.
I think what you say can always happen but the odds of success in EV is heavily in Tesla’s side. History shows that legacy folks are the last ones to adopt and appreciate new things.
This is one lesson I learned from and perhaps the one that has made me the most money. Always focus on the lead husky. On average, this is the winning strategy.
Buy excellence, add to excellence, and sell mediocrity. It is magical.
Maxx Chatsko To be clear, I think Tesla is fine. I just don’t see the need to automatically discount all other companies in the EV space because Tesla has done well with its 1% market share.
There’s a willingness to work at Tesla in batteries, but Tesla has also created a market for others to strike out on their own.
Anirban Mahanti And yes @Maxx Chatsko I agree, but I am less enthusiastic about legacy auto surviving as OEMs. Lower and lower probability of success. The leaders keep moving ahead. The legacy stuff have to juggle the old stuff, the new stuff, and all the baggage that comes with transitioning. They also don’t have the balance sheet of an Intel to make that transition.
Unlike the tech giants of today who have balance sheets and FCFs to allow them to miss the boat, GM and Ford don’t have the option. That’s the challenge.
Maxx Chatsko Right, Ford and GM have those loans on the balance sheet. But they also sell affordable cars. Let’s see what happens when Tesla has to sell $25K cars — if it can. Wouldn’t the legacy autos have an advantage in running down the cost curve? The lowest cost Tesla is like ~$45K (and that’s with them taking the “cost of gas” out of the purchase price for me — how nice). That’s not a mass-market car.
I’m not looking at the negatives, I think I’m being realistic.
Steve Symington $35K and change* — their cheapest model 3.
Maxx Chatsko $45K for the base model including taxes and fees for me in PA.
Steve Symington Perks of living in Montana, I guess?
Maxx Chatsko “Bear mode” = $2,500
Matthew Cochrane I was curious. Looks like $40K for me and no delivery until February 2022.
Anirban Mahanti It’s all sold out. That’s after all the major suppliers sending cells to Tesla!
We can’t get a Model S in AU until the end of 2022.
Things will improve once Texas and Berlin come online.
Maxx Chatsko Yeah, that’ll solve the chip shortage *sarcasm*
Anirban Mahanti I think the chip shortage will sort itself out. None of it is really at the high end.
Dan Kline It’s hard to get nearly any car right now.
Matthew Cochrane This is a fantastic debate, good stuff from both sides.
Now let me tell you how it will really play out…
I have no idea!
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