David Mondragon, president and CEO of Ford Motor Co. of Canada Ltd., was at this year’s Vancouver International Auto Show to introduce the company’s first full electric car, which is due on the market in 2012. Mondragon spoke with Business in Vancouver about the electric car’s future.
The market is going to continue to be low for electric vehicles because the prices are high and there’s no infrastructure. And in Canada, there’s far less infrastructure being put in place than a country like the United States or Japan or some of the emerging markets.
So there’s a lot of work that has to be done here; it takes a lot of money and a lot of resources. That said, electric vehicles will have a place short term in Canada. But again, we think pure electrics will have a very low adoption rate in the short term. As we go further into the cycle, they’ll get stronger as this infrastructure gets put in place. Now that said, hybrids are here today and hybrids are a great alternative more fuel-efficient vehicles.
We have the most fuel-efficient hybrids in the market. We think hybrids will make up between 20% and 25% of the industry by the end of the decade.
Traditional fossil fuel vehicles will still be about 75% of the industry at the end of the decade … because they’re getting so much more fuel-efficient.
There are a lot of options in the market, and we think that very fuel-efficient cars will be short term, hybrids mid term and electric long term. There is a place for full electric, but we have to start bring them to market now.
We met with the former premier, Gordon Campbell, at the beginning of last year and Minister [of State for Climate Action John] Yap to talk about infrastructure. First and foremost, there needs to be infrastructure put in place to support electrified vehicles.
I read an article that any building being constructed or renovated has to have charging stations for residents. So, right now there’s capability for 4,000 residences in Vancouver to live in a building with charging stations. That’s not saying that there are 4,000 charging stations here. I recall the article saying they’re going to be coming online about 800 more incremental per year.
So if you think about the population here and you think about 4,000 to 5,000 people with available charging stations, it’s just not a lot infrastructure to support rapid growth. So, the first thing that has to happen with government is we need their help in investing in that infrastructure so that we can move forward with greater adoption.
It’s kind of like Field of Dreams: build it and they will come. We’ve got to have that infrastructure to support the industry. That said we met yesterday with Best Buy, their president and CEO. We’ve got an alliance with Best Buy in the U.S. to put charging stations in people’s homes and work and we’ve had initial discussions with Best Buy to see if we can continue that relationship and extend it beyond the border into Canada.
There’s a misconception that just because it’s electric it’s totally green. Well the electricity – if you’re not in a green area you’re using fossil fuel or coal to generate that electricity. So there is non-green technology that supports the infrastructure for green technology.
We’re in a place that’s very unique in Vancouver and British Columbia, where it’s got the highest level of hydro energy in the world in terms of utilization and production. So, this is an environment that can truly adapt green throughput in terms of the process from start to finish. It’s a very unique part of the world that can produce energy in a green way and then support that energy infrastructure and consumers in a very green way.
They are zero-emission vehicles and they’re great opportunities to save energy. The cost to charge one of our Focuses, for example – and the Focus gets 160 kilometres per charge – is about $2 to $3. There’s a very low energy requirement to charging.
But with a lot of short-term resources. We’re going to build our Focus off of our same platform. It’s off the platform of our non-electric vehicles. And that gives us great efficiency and great economies of scale. So we’re very invested in the electrified arena.
We’re going to have a lot of different offerings in that arena. We’re going to have a lot of hybrids, we’re going to have plug-in electric and we’re going to have plug-in hybrids that will take efficiency and the range of a hybrid vehicle up exponentially over a non-plug-in hybrids. And they’ll all have a role to play for Ford.
No, not at all. We’re investing billions of dollars in electrified platforms. All we’re saying is that it’s going to take a while in Canada. Hybrids are an easy adaptation for us because you don’t need to plug them in and they get double the range of a non-hybrid vehicle.
Once we go to full electrified vehicles, you’ve got to have the infrastructure to support it, which is costly to do. Not only are you paying a premium for the battery cost and the technology at lower volumes, but you’re also going to have to pay a premium to put in charging stations.
The payback for that is great, because of today’s fuel prices. The premium will drop with higher volume and government assistance on infrastructure. What we need is to work with the government to get that infrastructure in place and their support financially to help consumers and businesses get that infrastructure in place. We don’t need government to [subsidize] the cost of purchasing a vehicle. We don’t believe that’s their role.
We made hard decisions early. Our competitors didn’t. We went to the financial markets and borrowed $23 billion early at great cost to the company. The interest alone on that $23 billion is close to a couple billion a year.
We’re paying back every one of those loans to the stakeholders. We drew down our debt last year alone by $14.5 billion. And we’ve said we’re going to pay back another $3 billion this year in the first quarter alone. We’re managing our business very closely, and we’re working very closely with our stakeholders to draw down our debt as fast as we can and put us in a favourable position financially. We feel very good about our position.
We didn’t take government loans for a reason. We had a plan and we right-sized our business very early. We closed close to 30 plants globally. We let go 120,000 employees globally. We made all those hard decisions before the downturn so that we would be in a position of strength as the economy started to emerge and that’s what we’re able to take advantage of today.
And a lot of that money that we borrowed, not only went to right-size the business, but went into all of our new product that we’re bringing to market. They say the companies that do the best after a recessionary period are the companies that invest the most aggressively during the recessionary period. And it’s hard to do if you’re clawing back resources. We didn’t have to do that. We didn’t cut any of our production plans during the downturn. So we invested heavily in the vehicles you see in the market today.