Ford Motor Co. will suspend end-of-lease buyout options for customers driving all-electric vehicles, provided they pick up the model after June 15, 2022. Those who grabbed their Mach-E beforehand will still have the possibility of buying the automobile once their lease is over. However, some states won’t comply with the updated rules until the end of the year, regardless that customers are almost guaranteed to wait at least that long on a reserved vehicle.
The change, made earlier in the month, flew under our radar until a reader asked about our weekend support. Ford may want to capitalize on exceptionally high used-vehicle prices, ensuring more vehicles come back into rotation. The wider industry has also talked about moving away from traditional ownership to shift the auto market to a more service-oriented one, where manufacturers ultimately retain ownership of all relevant assets. But it may not be so simple, as it’s just another step in the corporate sector’s broader plan to maximize profitability by discouraging private vehicle ownership.
Truth be told, electric vehicles generally don’t hold their resale value very well. While there are certainly exceptions to this rule (e.g. Tesla products), this has remained true even after fuel prices hit new highs. One explanation could be the fact that battery-powered vehicles tend to become obsolete quite quickly – much like a laptop or cellphone – due to the technology’s relative infancy and subsequent development efforts. Benefits aside, there are also lingering questions about battery life, the costs associated with replacing a battery, and how long it will take before something better can be had.
We’ve also been getting warnings for years that the chances of battery production reaching a scale that would support widespread adoption of electric vehicles are slim. Material shortages have already started to show up and have been compounded by two years of declining productivity resulting from COVID shutdowns. The industry knows it is going to have a shortage of the most essential components of all-electric vehicles in the future. This, combined with the fact that batteries are also the most expensive item installed in electric vehicles, may explain why Ford wants to keep them on a leash more.
Ford did not go into specifics and simply explained that it wanted to keep the vehicles in its own network in order to better manage recycling and raw materials. But it doesn’t take much imagination to see why battery hoarding might be on the table if the above complications are to remain in effect. If the Blue Oval can’t source the necessary materials from vendors, keeping what they have now is the logical answer. But raw materials may not be the only factor at play here. We’ve seen other automakers restrict what customers can do with their leases (e.g. General Motors) since vehicle supply became tight in 2021. Although you have to decide if that’s a necessary decision to help offset a vehicle deficit or simply a clever way to compete for control of the used market.
The Mach-E is also the subject of a full recall over faulty battery contacts that the manufacturer fears are overheating. Battery fires have done a lot to undermine the adoption of electric vehicles around the world. Even the mere possibility of an electric car catching fire in a garage deserves a lot of attention due to the difficulty of dealing with battery fires, so the press rarely misses an opportunity to report on it. Ford’s issue with the Mach-E hasn’t resulted in any known injuries, but there’s a chance management thinks the company’s chances might be better if they can guarantee more will come back through a service center. Perhaps the Blue Oval just doesn’t like the idea of customers owning older battery-powered vehicles.
One could speculate ad infinitum on the reason for this decision. But your author is inclined to believe that it is a conglomeration of problems, the issue of the recall being of less importance than Ford realizing that it could soon become exceptionally difficult to obtain batteries. The same goes for the company that wants to move towards more rental, especially since the industry often talks about the broader premise of “mobility” which often includes the imposition of curious limitations on ownership of a vehicle. It hasn’t even been a month since Ford CEO Jim Farley suggested fundamentally changing the entire company. This included suspending traditional advertising campaigns, scrapping the existing concession model and moving to online-only sales where customers cannot negotiate price.
“We have to go for non-negotiated prices. We need to go 100% online,” Farley said at Bernstein’s 38th Annual Strategic Decisions Conference in early June. ” There’s no [dealer] inventory, it goes directly to the customer. And 100 [percent] remote pickup and delivery.
This type of talk often coincides with industry leaders promoting their own branch of financial services, finding new ways to keep customers connected to the current brand, and prioritizing new modes of business where the manufacturer retains ownership of the vehicles it “sells”. Ford has certainly discussed these topics in the past, however, the game of not buying out a lease has yet to overlap. Although all car manufacturers are fairly consistent in providing us with the same lines whenever these diagrams are called into question.
“Ford Motor Company is committed to making battery electric vehicles (BEVs) more sustainable and affordable for our customers by localizing the complex web of the battery supply chain, creating recycling options for end-of-life vehicles life and increasing battery production in the United States,” Ford explained. in a memo on the new rental rules. “Purchasing the BEV Lease helps us achieve our goal of being carbon neutral by 2050 by monitoring the vehicle’s battery throughout its lifespan, keeping it in the Ford network. »
Although leasing customers cannot purchase their EVs, Ford Credit will be allow them to renew an expiring contract in exchange for a completely new model. Surprisingly, the manufacturer tries to present this as environmentally friendly. But it smacks of planned obsolescence and despair from where I’m sitting. Ford knows that electrical appliances require much less labor to produce. By also retaining/recycling the most expensive component (the battery), it can effectively maximize profitability over a three to four year time frame.
For now, the updated leasing system is limited exclusively to all-electric products (eg Ford Lightning or Mach-E “Mustang”) sold in 37 individual states. But long wait times for new electric vehicles and Ford’s desire to expand the plan throughout the year mean it will be nationwide by the time most people pick it up.
[Images: Ford Motor Co.]
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