Ford has been making cars for 118 years — nearly all of them with internal combustion engines. It now faces the biggest challenge in its history. As the electric vehicle (EV) revolution accelerates and people rethink their relationships with cars, both automotive incumbents and upstarts are planning for a radically different world.
Ford’s chief product platform and operations officer Hau Thai-Tang is ideally placed to discuss what that shift looks like. He and Azeem Azhar explore how EV uptake will transform what a car is and what it means to own and drive one, as well as what it will take to retool Ford to thrive in the technology age.
They also discuss:
- How doing away with combustion engines will revolutionize car design.
- Why exponential uptake of EVs could happen within the next five years.
- Why carmakers will start to look more like Netflix and Apple.
@azeem
@exponentialview
Further resources:
- ‘Ford, SK to invest $11.4 bln to add electric F-150 plant, three battery factories’ (Reuters)
- ‘Trends and developments in electric vehicle markets’ (IEA)
- ‘Levels of Autonomous Driving, Explained’ (J.D. Power)
AZEEM AZHAR: Hi, there. I’m Azeem Azhar, and you’re listening to the Exponential View podcast. Now, every week, I come together with a brilliant mind to explore how exponential technologies are shaping our near future. There is a thesis behind all of this, and I lay it out in my new book. It’s called The Exponential Age, for those of you in Canada and the U.S., or Exponential elsewhere in the world. And this thesis is that we are entering into the exponential age. It’s a new period of human affairs catalyzed by accelerating technology platforms across four broad domains: computing, energy, biology, and manufacturing. You can get a copy of the book wherever you get your books or go to exponential-book.com. If you listen to this podcast or read my newsletter, you’ll recognize parts of that thesis come to life in these conversations.
AZEEM AZHAR: The car is emblematic of the 20th century, defining modern life and our lives in cities like perhaps no other technology. And no other car company is as emblematic as Ford, which first drove down the price of the car and brought with it the innovations of permanent high-wage, blue-collar work, mass production, and even the two-day weekend. Today, as we transition through to the exponential age, the purpose of the car, the nature of the car, is up for grabs. Electrification, connectivity, autonomy, new models of sharing ownership are promising a very definitely future for our four-wheeled companions. So, I’m delighted to have as my guest today, Hau Thai-Tang, the chief product platform and operations officer at Ford globally. In that role, he’s across a number of the developments that will shape the future of the industry across electrification, connectivity, business models, and autonomy. He’s the man responsible for steering a 118-year-old car company through to its future. I am really excited about this podcast, which is full of sparkling nuggets about the future of the car. But before we start, there are a number of acronyms that come in the episode which it might be useful to gloss quickly here. An “ICE” is an “internal combustion engine.” It’s a car that is powered by a petrol or a diesel engine. A “BEV,” a B-E-V, is a “battery electric vehicle.” An “OEM” is an “original equipment manufacturer,” and here it mostly refers to car makers. And “OTA” means “over the air.” It’s an OTA update to the car software. It’s distributed digitally using the data network that most new cars have today. Hau Thai-Tang, welcome to Exponential View.
HAU THAI-TANG: Hi, Azeem. Thank you so much for having me.
AZEEM AZHAR: 120 years is quite the legacy to protect, and there are a lot of changes going on. So if I may, I’d like to start with electrification. When did you first come to the conclusion that electric vehicles were going to become ubiquitous on our roads?
HAU THAI-TANG: Ford started to introduce electrified vehicles almost 16 years ago, and it started with our hybrid vehicles. We really didn’t change our mindset around how fast the transition would happen between the internal combustion engine and electrified vehicles until maybe five or six years ago. I have to give credit to Tesla. They really did a great job of demonstrating that, not only can we make electric vehicles something that’s aspirational, but also demonstrate that there was way to make money at it. It was a watershed moment for many of us in the industry.
AZEEM AZHAR: Tesla proves that there was consumer demand, that there was a business model. But what are the other factors that come to play when you were looking at this question and the timing around product development around electrification moving from hybrids and small tests to the kind of commitments that we see today?
HAU THAI-TANG: We tended to try to anticipate and predict how the transition would happen, and a lot of that is regulatory, what’s going to happen with government mandates all around the world, in terms of improvements in carbon dioxide (CO2) reductions or reductions in emissions and fuel efficiency. We looked at things like the business case, how quickly would the cost come down. We would look at things like the infrastructure on charging and the electrical grid. As an incumbent, you often fall into the trap of trying to hedge your bets because of all this uncertainty. The startups don’t have that – they’re not worried about hedging their bets. There’s one bet, and you’re racing to make that happen. So kind of the pivotal moment for us was — we were in a discussion, and one of our board directors said, “Well, rather than trying to anticipate what’s going to happen, why not try to create that certainty?” And that was a very fundamental change in our approach, and it led to things like us siding with California in the US, which was leading the green states in terms of their policy. That was the start of saying we want to lead this transition from the internal combustion engine into the battery electric vehicle world, and that mindset change really accelerated our progress.
AZEEM AZHAR: But it’s such a fantastically complex change that is required. There’s an entirely new vehicular design. There’s a new powertrain. There’s a new supply chain. You have to get these batteries from somewhere, and Ford has made investments in battery startups, as well as this enormous investment with a Korean company: $11 billion in more traditional lithium batteries as well. And then, of course, once you’ve done all of that, you have to package that and get that out into the consumers’ hands. Where do you even start once that decision has been made at the board level?
HAU THAI-TANG: It starts with — how can we take advantage of this new propulsion system to really reimagine the value-add that we can create for our customers? We’ve had this paradigm for over 100 years. Ford is approaching 120 years. We’ve always designed our products, including, by the way, our first-generation battery electric vehicles, around a constraint of having an internal combustion engine. As a vehicle designer, those things really dictate the vehicle architecture. So everything from how the vehicles looks — those things like the distance between the front passenger and the front wheels. Well, in an ICE world, the longer that distance — it was a way to significant that you had a larger engine. That was the way you communicated performance and prestige and then pricing. But what happens if you no longer have an engine? You have a lot of freedom. So reimagining the vehicle and using electric propulsion to amplify the attributes that the customers love — that was the starting point for us.
HAU THAI-TANG: And then, we took it a step further. We thought about the entire business model and the value-add and differentiation. You touched on the supply chain. Today, most OEMs in an ICE world, we typically purchase about 70 percent of the value of each vehicle from the supply base. The 30 percent that’s done by the OEMs — typically the engine, the transmission, and the sheet metal stampings. If you no longer have an engine and a transmission, you’re value-add as an OEM reduces to about 10 to 12 percent.
AZEEM AZHAR: Your point there being that the suspension and the brakes and the seats and much of the internal electronics are all produced by third-party, tier-one suppliers — the Bosches of this world, the Valeos, and so on. A lot of what you now do is coordinate and complete and bundle together those third-party components with the 30 percent that’s traditionally been yours.
HAU THAI-TANG: That’s exactly right. We would call it the systems integration, and then we would do the sheet metal and the power train. The actual attribute tuning and the design of vehicles is what we would say, “Here’s how we’re going to differentiate our brand from someone else’s.” That’s completely going to change going forward, as you move to electrified vehicles. That was a mindset shift for us. Also, with the events that have played out over the past 18 months — between some of the constraints in the supply base, the impact of COVID, which exposed some of the risk around just-in-time inventory as a prevalent business model within auto, and how interconnected our global supply chain is — it really forced us to think about what are we going to make and buy going forward. And it led to the strategy of having a partnership, a joint venture with SKI, South Korea Innovation, a large battery supplier — for us to basically be able to have greater control over that very critical part of the value chain.
AZEEM AZHAR: You have identified that the batteries are something you want to have closer to you. They are more strategics, so you want to have better line of sight. We’re also seeing this sharp end of the semiconductor shortage. I know that some car companies are starting to get into the realm of building their own semiconductors. What would your take on that be, looking at the lessons of the last 18 months?
HAU THAI-TANG: If you count the number of integrated circuits in a vehicle, it’s in the 100s, if not close to 1,000. In many cases, we treated them as a black box — literally and figuratively. We would buy a black plastic module from a supplier, so let’s say an engine control module from a Bosch or a Continental or a Valeo. We often would allow that tier-one supplier to dictate how they wanted to design the printed circuit board and who they would buy the chips from. We didn’t even know. We didn’t have the granular bill of material down to the chip level. We knew, “These are the function requirements. But Mr. Tier-one supplier, you are the full service supplier. You decide how you want it completed.” So the lack of transparency of knowing at the chip level, who they are buying that from was something that we didn’t have enough visibility on. That’s just at the tier-one. If you go down one step below that, they would say, “Well, I’m going to buy that particular chip an NXP Semiconductors or an Infineon or an STMicroelectronics. We would call that a tier-two division. And then, many of those companies are fab-less, meaning they don’t actually make their own. so they’re contracting to TSMC or somebody else to make the integrated circuits into a silicon wafer. That’s down at tier-three level. So the need for us to have a better understanding and better visibility all the way down through the supply chain and then recognizing the capital intensity and the lead time associated with each level of the supply chain is one of the learnings coming out of semiconductors.
AZEEM AZHAR: What’s the argument for or against increasing vertical integration and saying, “Well, perhaps an OEM of Ford’s scale needs to be much more vertically integrated than perhaps OEMs have been in previous generations”?
HAU THAI-TANG: I think any time there is a make or a buy decision, most companies look at multiple considerations. One is, “what’s the scale leverage?” So we launched our Mach-E battery electric vehicles, and our volumes just for that one vehicle would not be high enough to justify the capital investment to build a battery plant. We wouldn’t be able to completely utilize that plant — and we’re talking approaching a billion dollars of asset-intense capital intensity to vertically integrate and build a batter plant — for that one vehicle. It would be not fully utilized, so you have to have efficient scale. That’s number one. Two is you have to really be able to convince yourselves that you could do it better than someone else who — that’s their business. Can we actually do it better than our suppliers? And then another very important consideration is, what’s the longevity of that particular technology? I’ll give you a real-world example. In the early days of electrification, one of the large Japanese OEMs decided to build batteries for their hybrid vehicles, and the technology they bet on was nickel metal hydride. They spent more than a billion dollars to vertically integrate. As soon as they made that investment, the landscape shifted to lithium ion. That’s a completely different manufacturing process. So they were basically among the last to switch over to take advantage of that, the improved energy density of lithium ion, because they had these sunk investments in an older technology that they had to sweat the assets. So we’re very mindful of that as we do this partnership, which we’re calling Blue Oval SK, between Ford and SKI. We’re looking at the manufacturing process. We want to make sure that it’s something that can be flexible enough to accommodate a shift in battery chemistry, as well as format.
AZEEM AZHAR: But in amongst all of this, what I hear as well is a whole raft of new technical skills in engineering and battery chemistry and software engineering skills that are required. That makes me wonder about internal culture and internal skilling because all of this work has to be done by your people. So what are the lessons that you learnt about the people changes, the cultural requirements to manage this transformation and manage a process where you say goodbye to the old ways of doing things and try to welcome in the new?
HAU THAI-TANG: I was actually in a meeting today with our CEO, Jim Farley. He talked about snowboarding versus skiing. Both sports require you to go to the same mountain. You ride up in the same chairlift. But it’s completely a different skillset to get down. That’s kind of the way we’re thinking about this. There are some parallels. There are some things that are the same mountain and as the same chairlift, and there’s a lot of skills that are different. We’re trying to figure out how do we leverage the things that we know how to do really well — delivering technology at scale, being able to democratize technology, building at very high volumes, understanding our customers’ needs — their unmet and unspoken needs — and being able to translate that into innovative product and services. We want to leverage the expertise we built up for the last century, but we know there are new skillsets that we don’t have. Software versus hardware. Delivering experiences and services, rather than just the products. Battery chemistry, that expertise. We’ve done some very select, but impactful hiring. People like Doug Field coming from Apple and Tesla and Segway. Our chief marketing officer, Suzy Deering, joined us from eBay and Verizon. So at all levels of the company, we are bringing on board people who have done this before and using that to help accelerate that transition. You can sort of leap frog and not make some of the same mistakes and expedite that learning curve if you have people that have done that before in other industries.
AZEEM AZHAR: How extensive, though, is it throughout the organization? So beyond the top tier of your peers and their direct reports, there must be some resistance, right? Some almost ideological sense of unease about the change that parts of the organization must feel. What does that look like, and how do you overcome that?
HAU THAI-TANG: We’ve done the same approach at all levels of the organization. We’ve done some really impactful acqui-hires. For example, we brought on about 600 software engineers from BlackBerry when they kind of changed their business model. To your point, any time you are trying to affect change in an organization, the majority of the people are fence sitters. They’re not resistors. They’re not leading a change, but they’ll go with the flow and the momentum of the organization. We don’t worry about those folks. We try to find the change agents, and sometimes you have to bring in new people, like the examples I gave. And then, you have to identify the resistors. They either have to stop resisting or they have to go find something else to do, if they don’t believe in the mission of what you’re trying to do. If we do that well, we can really accelerate that transition. We also have done things, like create skunkworks teams within Ford. The team that did the Mach-E, our first true ground-up battery electric vehicles. We refer to them at Team Edison. We literally got about 100 of our best, most progressive people across all disciplines, and we put them in a dedicated building and gave them this charter of “You guys are going to go disrupt our business and challenge all of the existing paradigms. Think differently. Leverage Ford in the areas where we can help. And in the areas where we don’t have that expertise, you guys have to go off and blaze a new way of doing business.” That’s really helped us innovate from within.
AZEEM AZHAR: That’s a fascinating case study for me to hear because that is often the question that executives are struggling with — which is, how close to the core should you be with project like this? If it’s too close, you smother the innovation. If it’s too far, you get something that’s perhaps too reckless in its direction. And finding that tension, is it an art more than a science?
HAU THAI-TANG: Yeah, I think it is. Our business is so interesting because it’s very capital-intensive. A new product program is on the order of a billion dollars. The margins are razor thin. They are single digits. And if something goes wrong, people could get hurt.
AZEEM AZHAR: Right.
HAU THAI-TANG: It’s like building bridges, right? There’s not a lot of innovation and risk taking when you high capital intensity, low profit margins, and the downside risk in terms of injuries to the customer are high. So knowing where you should go fast and break the rules and change existing paradigms versus when you should follow the process and have that Six Sigma mindset is really the key. That was the way we thought about it. We gave the teams guardrails around, “In certain areas we want you to, I call it, paint by numbers. Just follow — put the colors in the boxes the way we tell you to, and we’ll take 300,000 pictures that look just like this.” And then in other areas, where you really are encouraging them to break the rules, “fail fast, learn from it, and innovate.” That is a fine balance.
AZEEM AZHAR: We’ve talked now a little bit about the need for electrification. We’ve talked about the supply chain issues and the organizational dynamics. So let’s look at the market for electrification. I was heartened to note that in the last few months Ford has started to bring forward its expectations gently about those levels of electrification in your sales by 2030. It was about 40 percent by 2030 in the last few weeks. The estimates have been heading to about 50 percent fully electrified vehicles. So what has driven that upward revision, and could those factors accelerate more in the coming months and years?
HAU THAI-TANG: I think it starts with the product is better. The reception that we’ve gotten on our Mach-E and the very strong demand based on the reservations that we have on the Lightning has really energized us. It’s coming in three-fold higher than what we had predicted, in terms of our planning assumptions. So that’s a really good sign. And then, we’ve been monitoring data from early customers, and 80 percent of customers who have switched from an ICE to a BEV will never go back. We see this as a huge opportunity for us to capture those customers and have them stay with the Ford family for the entire consumer life cycle. And then the business model challenge is driving the cost down, improving the profitability. That’s normal business challenges, so we would rather work on that than trying to forecast how the compliance landscape will play out.
AZEEM AZHAR: One of things that fascinates me about this transition from the ICE vehicle to the EV is how quickly it might really happen. I have written in previous years about how there are these self-reinforcing loops that might make a phase transition happen more quickly. In my own experience, where I live in Northwest London, the fuel stations are very marginal businesses. Actually, they make most of their money selling sodas and potato chips and chewing gum. It only takes a few of the local neighbors to move to electric vehicles for those to become unprofitable and they’d get turned into apartments. This has happened. And then, as the owner of a diesel vehicle, I now have to drive an extra eight minutes to fill up my car. It’s a bit more inconvenient. At the same time, I’m seeing more and more of my neighbors pick up the occasional electric vehicle, and I can see that the transition happens quickly. And I’ve observed what’s happened in ice-cold Norway. Twenty percent of new car sales were battery electric vehicles about six years ago. The latest six-month data is that it’s closer to 90 percent BEVs, and that’s well ahead of the Norwegian’s government’s plans to make the sale of internal combustion engine vehicles illegal. So there’s been a real phase transition in that particular market that’s happened much more quickly, I think, than any traditional carmaker forecast in its plan. Could that happen in other markets and in bigger markets, do you think?
HAU THAI-TANG: We believe the adoption curve will not be linear. It’s going to be exponential, and it’s the combination of all the things that you’ve touched on. You’ve got the incentives to create the demand, whether that’s congestion charges to get into Central London or tax incentives to buy a zero-emissions vehicle. Those things will certainly help with the demand side, as more and more products come out and customers can experience firsthand that it’s a better product, that it amplifies the attributes that they love. For us, the way we’re thinking about it, we’re leaning into our icons. Mustang, we’re going to use electrification to amplify performance. Transit, we’re going to use electrification to amply productivity for our commercial customers. F-150, we’re going to use electrification to amplify towing or torque — those types of things that those truck customers demand. That will certainly accelerate. And then, don’t underestimate the generational shift. I have two daughters. One’s just graduated from university. The other one is in university. They would never think of buying an internal combustion engine. It’s not something that they aspire to. So I think as more and more of those young buyers move into the marketplace, they will accelerate that transition. And of course, the economics will get better, right? The cost of the batteries, and the business attractiveness will improve, as well.
AZEEM AZHAR: Right. I mean, I’m excited about that. My sense is that transition could — provided the suppliers can meet the demand — happen quite rapidly because there is that memetic effect. You talk to somebody who owns an electric vehicle, and they wax lyrical about it in the way that only the petrol heads used to was lyrical about their cars. When we think about the diffusion curve, that’s what takes us from the early majority through to the late majority, right? Because the early adopters just buy it because it’s new. The early majority buy it because they’ve seen some proof points. And the late majority really don’t care. They want to hear it from someone who they trust, and that is the exponential part of that S-curve. If that’s the case, what is your feeling about when that happens? Is it when 15 percent of new car registrations, say, in the U.S. are electric vehicles? Or is it 25 percent? Do you have a sense of when we should look for that takeoff?
HAU THAI-TANG: I think it’s going to play out within the next five years. You will start to see that really exponential growth. You will start to see a lot more supply, a lot more choice — in terms of battery electric vehicles across many different markets and segments. And then the infrastructure will come online and, of course, the business case will improve. We’re all saying 40 to 50 percent of the mix globally by the end of the decade, but I think that acceleration will happen within the next five years.
AZEEM AZHAR: You have a global platform. It’s all good and well for us to talk about this in richer countries, but how should we think about electrification of personal transit in emerging markets, where infrastructure is perhaps even more rickety than some of the infrastructure in the U.S.?
HAU THAI-TANG: I feel like in many of those countries, this is a way for them to leapfrog and just skip through that transition and catch up. There are generations of customers in Finland that have never had a landline. There are generations of customers in Asia that have never had CRT [cathode ray tube] TVs. I think in many of these places there are going to be generations of customers who have never experienced an ICE vehicle. And the Infrastructure — it’s something that governments will have to invest in, but there’s a good business case for it. It addresses a lot of important societal issues, including climate change and air quality. We are firm believers that if we work on things that address important societal issues, it will lead to good business results.
AZEEM AZHAR: Where does that place hybrids? I mean, are hybrids just something that are a short-term technology that will actually probably be worth just skipping if you’re a consumer in some sense?
HAU THAI-TANG: We think of it as a transitional technology. There are still going to be places where, because of the infrastructure and how far you have to drive, having the benefits and flexibility and energy density of an ICE vehicle will still create some demand and longevity. In those cases, having a hybrid is just a very efficient way to extend the range and improve the fuel economy of those vehicles. Of course, as the cost of batteries improve, the battery cost in those hybrid vehicles will also improve. So the crossover between an ICE and a BEV is sort of a moving target, because they hybrids benefit from that as well.
AZEEM AZHAR: Now, look, electrification is only one aspect of all of the changes that we’re dealing with, and I want to bundle in some of the others. I mean, we have to think about this move towards increasing autonomy in vehicles, the move towards connectivity as well, and shifts in business models. In a sense, they’re all slightly related, but I’m curious about autonomy. Back in the start of 2019, in the years before COVID, one of the carmakers, a startup, had said that they’d be driving cars autonomously from New York to Los Angeles, and they never did. How do you look at the reality of autonomy and what customers actually want from it — not necessarily today, but perhaps in a few years?
HAU THAI-TANG: We think about it differently between a commercial customer versus a retail passenger customer. I’ll start with the retail customer first. I think first and foremost we look at is as building blocks, in areas that we can increase the level of automation and make drivers better drivers and safer. You see things like lane-keeping assist systems and adaptive cruise control, automated braking systems. Then we look at, are there thing that are just chores and pain points? Parking is a great example. So now, there’s automated parallel parking systems, perpendicular parking systems. There are now summons modes and valet parking systems. Nirvana, then, is getting to a conditional full-driving system, level three or four, where customers can really not only take their hands of the wheels but can be eyes off and mind off. That, to me, would be the next really important breakthrough. If we can deliver that, then certainly it frees our customers up to do other things.
AZEEM AZHAR: But there is an argument, isn’t there, about that transition from level three to level four is a chasm that can’t be crossed because the idea of having partial attention and then the car throwing control at you suddenly seems quite risky. There is a view that says “you either have to go all the way to level five,” which is what Waymo is trying to do, or you build layer after layer, after layer of enhanced automation and then you stop there until you bring out the new model, which is a level five.
HAU THAI-TANG: The trick is level three, as you’ve highlighted, Azeem — which is where you have conditional mobility, but the drivers still have to have their minds on and be ready to intervene. That’s always the slippery slope because we know from human nature, that’s hard to do. People start getting distracted and doing other things. So the way we’re trying to think about it is, for example, can I deliver autonomy in stop-and-go traffic on the 405 in LA, where you’re driving — max speed is 25 miles an hour. If the answer is yes, then that’s a value to that customer because they could be working or doing other things, right? But the system may not be able to do it on the autobahn at 200 kilometers an hour because the time required for the customer to be minds on and intervene is too quick, and you’ll travel too much of a distance in that space. We’re trying to think about it at under — not only what level of autonomy — but under what operating conditions. I think you’ll start to see solutions that offer kind of the minds-off functionality under very narrow operating conditions initially, and then it’ll progress from there.
AZEEM AZHAR: We’ve read for a long time — certainly for five, six, seven years out of the consultancies and the futurists — that the future of the car is exactly this. It’s electrically powered. It is increasingly autonomous. It’s connected and takes its over-the-air software updates and gets better. And then, finally, isn’t even owned by us. It’s some kind of shared mobility. Perhaps we summon it. Perhaps we keep it for a week at a time. With the knowledge that we now have and the experiments that have been run and the success of ride hailing networks, for example, what should we expect in that six or seven year period — so past the point where you think we’re in the S-curve of the electrification — that our vehicular experience would look like?
HAU THAI-TANG: I think the first shift that’s happening already is ubiquitous connectivity and the ability then to get the data off the vehicles to understand how the consumers are using the product and making it better over the age of ownership, through over-the-air updates. That is a big capability enhancement and a huge enabler for a business model change. Today’s businesses — most OEMs are one step removed from the customer — so we don’t actually own that relationship. And the vehicle starts to depreciate as soon as you drive because it’s not getting better. It becomes outdated. We can change that by having this direct connectivity to the customer in the over-the-air update, where the vehicle gets better over age. It allows us to transition from a transaction model — I sell you a vehicle, and I hope you come back in six years to buy another one — to a use model where I’m enhancing the value for you as a customer. So that, to me, is the biggest change, and that’s happening already. Electrification is right on the heels of that. Shared mobility, I think, is starting to happen in pockets. It’s going to be — once the vehicles start to become connected and you have this OTA capability, I think it’ll accelerate that transition even more. And then, of course, autonomy will be the last element. I think it’s happening. There’s a wonderful quote by a novelist that says “the future is already here. It’s not evenly distributed.” I think that’s very pertinent in this space.
AZEEM AZHAR: Can we pick up this important shift in your relationship with the customer, which is that you now start to have line of sight to our behavior through these vehicles. You said, “Well, it helps us understand their use better.” So what’s the type of data that you get back, and what of that data has surprised you?
HAU THAI-TANG: Something as simple as how frequently people drive their vehicles and how long they drive it for. If you go ask them, they’ll tell you, “I want 300 miles” because that’s what they’re used to with ICE vehicles. But if we show you the data and say, “You know what? On average last year, you drove only 20 miles a day, and you’re longest trip was 300 miles, or something like that. That only happened two times. We can help you right-size your needs.” What features they use. Today, it’s a debate. This is a real story. Our flagship Lincoln Navigator in the U.S. still has a CD player. I have this debate with my marketing colleagues on “Why do we have that?” It comes down to, “Well, we think we need it, and you don’t.” It’s opinions. But now, I should be able to get that data. I should be able to say, “Of all of our customers, here is how many times they have used a CD player,” and be able to make those decisions. For the commercial customers, it’s really interesting because we can help them become more productive. We can help them with prognostics. We can help them improve their up times. We can help them reduce the cost of ownership. The ability to enhance their productivity is something that’s very powerful.
AZEEM AZHAR: I’ve seen data that suggests that in the U.S., 80 percent of all personal car trips are less than 14 miles, 20 percent are less than two miles. So there is a logic, and the micro-mobility movement talks a lot of this. Which is, “well, why move 2 1/2 tons of vehicle for a 1 1/2 mile journey that’s perhaps just too uncomfortable to walk? Why don’t you move something that looks a little bit more like a golf buggy?” because the bulk of your journeys are like that. But that still leaves the question of, “what do I do for the 20 precent of journeys that are more than 14 miles? What do I do for the 5 percent of journeys I make that are 18 miles or 100 plus?” I can see the logic of segmenting vehicles by the journeys that get taken, but there are still these scenarios when we’re outside of the parameters of the most common journey. How should we be thinking about that? I mean, how does that get resolved for the consumer?
HAU THAI-TANG: You can imagine a scenario where you are buying access to mobility solutions, and it’s contextual. Maybe they pay a monthly subscription to a mobility solution, and the OEMs can provide them with that contextual solution. Of course, once you start thinking through how to manage that and what happens if everybody wants a convertible on a sunny day? What’s the working capital implications of carrying these vehicles on your fleet? It becomes a little bit more complex. But there is definitely an itch there to be scratched. Somebody will come up with an innovative solution to solve for it, which is why it’s so great to be in the business.
AZEEM AZHAR: Who has experimented well? I mean, when you look around the world at startups or incumbents who are trying this, and many are. Do you say, “Well, here’s a model that seems to be heading in the right direction, that is learning in the right kind of ways”?
HAU THAI-TANG: I am starting to see now multi-modal solutions. The example I’ll use is we have an engineering center in Cologne, Germany. I can book a ticket on a Lufthansa flight that also then gives me a pass to take the high speed train when I land in Frankfurt to get to Cologne, and then when I get off at the Hauptbahnhof [railway station], I can get a Deutsche Bahn bicycle and ride across the bridge to go to the Hyatt Hotel. So that’s three different modes of transportation, and I can pay for it once. That’s an example of a multimodal mobility solution that you can do. Ford — we own Spin scooter company. We’re looking at this example of how could we leverage that with some of our other mobility solutions to create more of a contextual solution, depending on the customer’s needs at any one point in time. There are examples of it. I think the technology where we can get better visibility around supply and demand can help broker the right solutions. If you think about a vehicle, and you talked about the example of your use of your car. On average, a customer drives to and from work. It’s maybe half an hour each way. The rest of time, that asset is sitting there idle. If you’re driving only an hour a day to and from work, that’s a 40 percent utilization of your second most expensive asset. That’s not a very efficient use of that asset, so it’s something that’s very ripe for disruption. Someone will solve it when they’re able to get better transparency around the demand and where the supply is.
AZEEM AZHAR: I find that my mixes aligns with the story that you tell. I often use electric bikes that you can rent on the street. We have a small electric vehicle that does all of the daily duty of school drops and quick errands, but it doesn’t fit the whole family nor would we use it on a 200-mile journey. So of course, we have our old, big ICE vehicle still sitting around for four journeys a year because we haven’t figured out how to solve that problem. Renting a five-seater car for those types of journeys is so prohibitive compared to just holding onto a fully depreciated vehicle. How do you imagine — what are the things that you think about for those extreme spikes in demand? It’s not like cloud computing where you just magic up more processing power. These are two-ton vehicles with big batteries. How are you going to deliver them to us?
HAU THAI-TANG: I think right now there are pockets of businesses — I just used one this past weekend instead of a rental car — there’s an app called Turo that allows people who are private owners to basically rent out their vehicles. To me, that’s kind of a workaround. It’s an asset-light workaround. But there is room for companies, and it could be an OEM like Ford, to be an orchestrator of these mobility solutions. That’s certainly something that we’re exploring.
AZEEM AZHAR: That actually makes a business look quite different to the way it does today because of course you’re still investing in batteries and you’re still investing in vehicle design. But now you’re also thinking about a services business driven by an app, which is quite high touch because there are people running fleets of service vehicles back and forth to homes. That, in and of itself, is a significant transformation that perhaps might be even more from a culture and operations perspective, at least the same sort of scale as the electrification transition.
HAU THAI-TANG: Yeah. Exactly. There are things that are going to be same, that are propulsion agnostic. And then there are things that are going to be new capabilities that we have to build with these shifts that we’ve talked about — connectivity, electrification, autonomy, and shared mobilities. A very, very exciting time for all of us.
AZEEM AZHAR: Yeah. This transition makes Ford look more like companies that we think of as being technology companies. Electrification together with a higher software in computing intensity within the vehicles, over-the-air software updates, now rental models. This doesn’t look like a car company of the past. It looks like a technology company, something between perhaps a Tesla and an Apple and a Netflix in some sort of way. Again, it’s easy for me to say those words, and it’s probably easy for me to put them on a PowerPoint slide. It’s much harder for you to bring shareholders with you on a journey like that and to change the way in which you have to compete. I mean, do you think you’d feel the pressure to compete like a winner-take-all tech company in that world?
HAU THAI-TANG: I think shareholders are already voting with their pocketbooks, right? If you look at the valuation and the market cap of some these startups, a company like Tesla, it’s already one of the most valuable OEMs in the world. How quickly they’ve been able to build that market cap, versus companies that have been around for 100 years, is pretty telling. Certainly we recognize that that’s a very strong signal from the capital markets on how they view the business, the longevity of the business, the potential for disruption. Once we started to embrace that transformation and became much more explicit about we’re going to lead this transformation rather than sitting back and watch it and then reacting to it, we’ve been rewarded for it. Our share price has increased by over 100 percent over the last 12 months. So I think it further reinforces for us that we’re on the right path, and we just have to accelerate that transition.
AZEEM AZHAR: When your founder, Henry Ford, pictured his vision for making cars affordable, he probably may not have been able to picture where we would get to 100 years later, where the car has redefined the urban space. We give a tremendous amount of our best land to the vehicle. They dominate, in fact, often the rules and the rhythm of life over the pedestrian and the human. We tackle these issues of air pollution and, of course, of climate change. When you now look out, what is the picture that you would like to paint for life in the city in a future mobility scenario?
HAU THAI-TANG: It’s something that we talk a lot about with our executive chair Bill Ford, Henry Ford’s great grandson. Bill likes to remind us that Henry’s motivation was to solve an important problem for society. This idea of creating safe, affordable mobility. There’s a saying that if you had asked customers what they wanted, they would have said a faster horse, right? Because they didn’t know — they are not scientists, they are not engineers, they are not innovators. They can describe their problem. They can’t prescribe the solution. So Bill’s belief, and our belief as a company, is mobility is a basic human right. It’s something that can create opportunities for people. The example we use is actually in London. London has become so expensive that native Londoners, people who are multi-generation Londoners, can no longer live in the city’s center. They can’t afford it. So they are being forced to move into the outskirts, but yet the job opportunities are typically in the city centers. The educational opportunities are in the city centers. The healthcare in the city centers. Worse yet, with the congestion charges, we are penalizing people who can’t afford the latest, cleanest vehicles. It becomes this vicious cycle, rather than something that can help lift people up. It’s actually keeping them down. So if we can solve that and create accessible mobility solutions, regardless of what form that may take — it may not be traditional automobile ownership as we know it, we would be solving a really important societal problem. And that’s clearly in the spirit of what Henry Ford was trying to do. This future we imagine would be clean, safe, accessible mobility solutions that could be automated and address not only climate change and affordable mobility, but also do it in a way that is with less congestion and more efficient. If we can do that, we can create a better quality of life for all of the citizens around the world.
AZEEM AZHAR: What happens, though, to the passion that people have had for cars? I mean, cars as a product have — I think of the film Grease that I watched when I was seven years old. Really, all about cars, frankly, and bit of music in the background. Think about something like the Mustang – you get a world where people have tattoos of cars on their arms. Will we look back on that behavior as sort of a quaint, historical moment of a century, as we functionalize mobility as a right and not a privilege and something that is as essential and as clean and really infrastructural as great water and sewage systems and broadband?
HAU THAI-TANG: No, I don’t think so. I think we will always have both. It’s just like you and I travel and we go to a hotel. Probably there’s not a big difference between a Hyatt or a Hilton or an InterContinental. You’re looking for location and value and availability. But at the same time, you are very passionate about your home and how you decorate it. There are times when I, as a car enthusiast, it’s a mode of transportation for me. It’s an appliance. And then there are other times where I love driving my Shelby Mustang with a flat-plane crank engine and hearing the exhaust and perfecting a heel-toe downshift. Just like a musician can enjoy playing an instrument and can appreciate listening to Muzak in an elevator, there’s a time for both.
AZEEM AZHAR: Hau Thai-Tang, thank you so much for your time today and taking us through the coming future of Ford.
HAU THAI-TANG: Thank you, Azeem, really appreciate the opportunity to tell Ford’s story.
AZEEM AZHAR: If you enjoyed this discussion, please check out our podcast feed where you can listen to previous discussions on the topic of the future of mobility. I spoke with Chris Urmson, the co-founder and CEO of the self-driving technology startup Aurora, and Duke University Professor Missy Cummings, a former naval fighter pilot and the director of the Humans and Autonomy Lab at Duke.
AZEEM AZHAR: Thank you to Exponential View members who helped us with this podcast: Catherine Lückhoff, Kwame Boateng, Michael Keating, and Stephen Meyer. To become a premium subscriber of my weekly newsletter, go to www.exponentialview.co. To stay in touch, you can follow me on Twitter. In the U.S., that @azeem, A-Z-E-E-M. Elsewhere, it’s @azeem. That is A-Zed-E-E-M. This podcast was produced by Fred Casella, Marija Gavrilov, and Mischa Frankl-Duval. Bojan Sabioncello is our sound editor.