Ford plans on leading the way to smarter cities in a series of new mobility initiatives that will see it move away from being a car maker and instead to being a transport company. Does it have enough left in the tank to complete this journey?
As many as 80 percent of executives in the auto industry expect the trend of connectivity to be disruptive, while 83 percent predict major disruptions to their business models in the next five years, according to consulting firm KPMG. But Ford Motor Company, the American giant that raked in over $150bn in annual revenue last year, is planning on staying one step ahead of the change, with a raft of innovative products and services.
Yet with its 2017 sales to-date down five percent year-on-year, and its share price on a volatile course in the past three years – improving 5.8 percent year-on-year to October, after witnessing drops of up to 30 percent since July 2014 – the question that begs is: has it already fallen behind?
Judging by the aggressive plans put in place over the past 18 months by chief executive Jim Hackett, it does not seem to be the case. The CEO, who joined in March last year, is trying to diversify its revenue sources on everything from electric and autonomous cars to smart mobility services, stating boldly that the 114-year-old firm does not want to “cede the future to anybody else”. The plans are all part of Ford’s City of Tomorrow vision, which comes as no surprise given Hackett is the former chairman at Ford Smart Mobility – a subsidiary of the firm created to accelerate its investments in emerging mobility services.
Hackett announced last month that by 2019 all of Ford’s new US vehicles will be built with modem connectivity. And by 2020, 90 percent of its vehicles sold globally will feature the technology. The firm also said early this year that it will deliver 13 new electric vehicles in the next five years, including the F-150 Hybrid, the Mustang Hybrid, a fully electric small SUV, a transit custom plug-in hybrid, an autonomous vehicle hybrid and more. In August it tried an autonomous pizza delivery service in Michigan to test customers’ reaction to self-driving car services.
A month later, it famously dressed a driver in a ‘car seat’ suit during a trial test of a lighting system it developed with Virginia Tech, which would allow autonomous cars to communicate their intent to pedestrians, human drivers and bicyclists. It also collaborated with BMW, Daimler AG and the Volkswagen Group, with Audi and Porsche, in a joint venture called Ionity that will see it develop a network of 400 HPC charging stations for electric vehicles that will be rolled out across Europe by 2020, with 20 opening by the end of 2017 and another 100 opening next year.
An electric UAE?
How does the Middle East, which constitutes a not insubstantial 6.5 percent share across Ford’s operational markets, play out in the automaker’s revolutionary plans? Raj Rao, chief executive of Ford Smart Mobility, says things are developing quickly in the Middle East, with an ever-changing infrastructure rate and ambitious economies wanting to be at the forefront of technologies. “They are doing a lot to make their cities intelligent. There are many smart city initiatives and a lot of infrastructure has already been built to make cities operate more efficiently,” he tells Arabian Business, ahead of this week’s Dubai International Motor Show where Ford will showcase its latest models.
But the region might not be ready for Ford’s electric charging stations yet, according to Steven Armstrong, group vice president and president of Europe, Middle East and Africa. Armstrong says the firm has no plans to roll out the stations in the Middle East yet, but he insists the firm is determined to electrify its vehicle fleets in the market. “We are looking at how quickly we can roll that out, which we hope to do by 2020. We have hybrid vehicles that are available and which we will continue to roll out... So we do see opportunity in the region to electrify our vehicles.”
If they were to introduce the stations, statistics show Dubai might be the best place to start, as it continues to lead the region in terms of innovation. It ranked 28 on the Innovation Cities Index in 2016-2017, with a rank of 74 on the quality of living and 51 on infrastructure. In April last year it also launched the Autonomous Transportation Strategy, which aims to turn 25 percent of total transportation autonomous by 2030 in order to help reduce costs and pollution. It is expected to generate around $5bn in annual economic returns through increased efficiency, the UAE government website says.
“We are really excited about the opportunity in Dubai with the 2030 vision. We think that fits very well with our view of moving into a more mobility-based business, and not just a vehicle-based business,” says Armstrong of these plans. “We’ve been working with authorities in Dubai and other cities in the region to figure out what future services could help with the mobility challenges [in the Middle East].”
Saudi Arabia would likely be next on the list. The kingdom said this year that it will invest $500m into modernising its infrastructure across 285 municipalities. It also announced smart city projects for 10 of its cities, with the number expected to grow to 17, eventually catering to 75 percent of its population. Two of its major developments include Al Faisaliyah, a city almost the size of Moscow, to be built west of Makkah by 2050, while the other is Entertainment City, a 334 square kilometre project that includes a safari area and Six Flags theme park.
Don’t call it Uber
One of Ford’s most exciting ventures is Chariot, an Uber-like commuter service that operates shuttles instead of passenger vehicles. Armstrong is not happy with the Uber comparison, however, and insists Chariot is a micro-transit system that aims at easing congestion in cities, whereas Travis Kalanick’s creation adds to the traffic.
“You need to differentiate that Chariot is not like Uber. It’s a different service to when one person needs one vehicle to move around. It takes a lot of congestion off the roads so when we calculate it, for every Chariot vehicle on the road, you could probably remove about 20 passenger cars from the congested city centres.
It is a big benefit to cities in terms of moving people, as opposed to Uber, where you have every Uber adding more vehicles in the cities,” he explains.
Ford is currently working with authorities in London to allow Chariot, which has already launched in several US cities, to run on fixed routes, changing only the pickup and drop-off points depending on commuters’ destinations, thereby managing the traffic flow. “We see that there are a lot of differences between how something like Uber works to how something a little bit more structured like Chariot works. And it’s been very successful in the cities where it is currently launching,” he says.
Ford is currently looking at whether there is opportunity to move forward with Chariot in the Middle East. Armstrong believes the service could very well prove successful in the region in terms of assisting in public transport challenges. “We just need to find the right time and the right place to roll it out. We are talking to authorities around what the cities’ requirements are and how fast we can make the initiation of Chariot work. If we can answer these questions it would be a big opportunity for us. We haven’t made a decision on where that would be yet, so I can’t say if it will be in the UAE, but I think it’s got fair opportunity given the authorities’ openness to finding new methods of mobility. It would be one of the markets that we would prioritise.”
The carmaker also announced in February this year that it invested $1bn into Pittsburgh-based artificial intelligence firm Argo AI to develop a virtual driver system for its autonomous vehicle set to debut in 2021, which will be used for the transportation of people or goods for commercial use rather than personal ownership. It will also be announcing a number of different mobility initiatives in various cities in the coming months, including one that revolves around parking solutions for congested major cities. “We tend to think of the city as one of our customers, so we have a city solutions team visiting major hubs all over the world and working with them to understand what problems they have and how they can be part of the process to solve those problems, rather than just assuming that we should put more vehicles on the roads,” says Armstrong.
Riding the regulations
Ambitious plans that could remodel the entire transport models of cities don’t come without their difficulties. Armstrong says the real challenge is in finding clever uses that add value and make a difference to mobility around the world. But then the more prosaic task of negotiating regulations has to be tackled.
“The key challenges are going to be ensuring that city state officials understand what regulations and changes are required to enable the use of the technology,” he says. “Obviously you’ve got to have the infrastructure prepared for autonomous vehicles, and regulations need to match that. So we’re working very closely with governments around the world to understand what needs to change, and getting the right use case for the technology. The technology in itself is interesting, but if it doesn’t actually have a use, then it’s not very useful,” he says.
While Ford may have a good chance of becoming a pioneer in smart motors and mobility services – it continues to be the second biggest manufacturer of hybrid electric vehicles in the US – it faces more testing times when it comes to its traditional passenger and petrol-powered cars. The company is preparing itself for the effect of Brexit, expected to have major impact on industrial firms in the UK and Europe, in order to be able to take the changes that will undoubtedly come up, according to Armstrong.
It is also facing trouble in the Middle East, where low oil prices have contributed to markets decreasing over 30 percent across the board across a two year period, according to Ford Middle East and Africa president Jacques Brent. On the other hand, the brand has not seen demand migration to its cheaper, lower models, managing to maintain an overall mix of cars it sells in the market, Brent said. While the challenges are aligned with the general recovery of the market, Brent said Ford is seeing stabilisation and positive change in the region, such as the lifting of the women’s driving ban in Saudi Arabia, an opportunity the firm will be able to realise next year.
The hope is that, with a strong US market (its September year-on-year sales were up 8.7 percent) and a $750m electric car venture in China with Zotye, the 114 year old brand is unlikely to lose its market share anytime soon. And with its ambitious connectivity plans in full force, it might be the case that Ford will cause more disruption in the world of mobility than it expect to face.For all the latest car news & reviews from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.