Navigant Research Blog

The Effect of Ford’s $4.5 Billion Investment in Plug-Ins

Scott Shepard — December 17, 2015

Despite a lackluster year for U.S. plug-in electric vehicle (PEV) sales, recent news from major automakers is encouraging. Last week, Ford announced its intentions to add 13 new electric cars to its lineup by 2020. The announcement is not entirely groundbreaking, as multiple German luxury brands are already well into developing and deploying plug-in options for most to all core model lines. What is notable is that the announcement came from Ford.

Over the last 5 years, automakers have gradually become more comfortable with PEV technologies, and the number of models available from more and more brands increases annually. Though the first mass market PEVs were introduced from economy brands like Ford, most of the new PEV introductions in the last 2 years have come from luxury brands, and most new models over the next 2 years are also coming from luxury brands. As such, according to Navigant Research’s recently published Electric Vehicle Market Forecasts report, the luxury segment is expected to grow to capture near 50% of the global PEV market by 2022, up from around 23% currently.

Economically speaking, the premium for the batteries that support electric drive becomes less pronounced as the vehicle price rises. In addition, luxury vehicle customers are more likely to value vehicle capability over vehicle costs than economy class customers. This is likely a reason why luxury brands are already pursuing Ford’s strategy and why Ford is the first of global economy brands to announce such a strategy.

A Modest Approach

Among economy brands, Ford has been fairly aggressive, with three PEVs in production for markets in North America and Europe. However, the company’s efforts have largely been overshadowed by Nissan and Chevrolet, which have spent billions establishing brand recognition through the marketing and production of the new dedicated plug-in model lines (the LEAF and Volt, respectively). Ford, on the other hand, has approached its PEVs more modestly, adding plug-in variants to existing model lines with limited fanfare.

It’s likely that Ford’s plug-in strategy hasn’t changed all that much with this announcement; 13 new electric cars probably means 13 new plug-in variants to existing model lines. Most of these variants are likely to be plug-in hybrids (PHEVs) with relatively short all-electric ranges compared to the next-generation Volt, but that’s not a bad thing.

PHEVs make it possible to drastically cut gasoline consumption. Owners of Ford’s current PHEV offerings have utilized battery power for 30%-40% of driving needs, and each mile powered on gasoline is more efficient over conventional platforms as PHEVs typically include the regenerative braking technology commonly found on regular non-plug-in hybrids.

In addition to the above, the sheer size of Ford’s announcement alongside its diverse vehicle portfolio is bound to include some interesting options outside of the small car classes that are typically associated with PEVs. Perhaps the development of a PHEV truck for the mass market is not too far off the horizon.

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