History often sets the stage for how we should think about the future, according to Chief Industrial Platform Officer Hau Thai-Tang, but we must also be mindful not to let the past limit our success in the future.

“If you really want to drive innovation, you have to appreciate history and how you got to where you are,” he said, speaking recently to Ford Retired Engineering Executives (FREE). “But we also have to challenge our preconceived biases so that we can take advantage of some of the big changes we’re experiencing in our industry right now.”

The big changes Thai-Tang refers to are disruptive forces, such as autonomy, connectivity, electrification and shared mobility.

To illustrate his point, Thai-Tang reflected on first-generation automobiles from the late 1800s, early 1900s.

“They look a lot like horse-drawn carriages without the horse,” he said. “Why is that?  It’s because when people were designing vehicles back then, that was their concept of what a vehicle should look like. And it wasn’t until the engines got bigger that the silhouette took on a shape that we all recognize today as the two-box design that underpins almost every utility vehicle in the marketplace.”

Thai-Tang said the two-box design made sense because it provided not only a way to house the engine and transmission but great proportions.

“That paradigm is wired into the way our designers think,” he said. “But what happens if you have no engine and transmission?  How do you define what a vehicle should look like?  If you look at first- and second-generation battery electric vehicles, they’re still defining vehicles the same way – like two-box utilities.” 

Vehicle design is just one example of how we need to think differently, said Thai-Tang. Other examples extend to our business model.

“One of the metrics we look at every time we do a vehicle cycle plan is the average age of portfolio. The premise in our industry is, the fresher the product, the greater the OEM’s ability to command pricing and gain market share,” he said. “If you’ve worked in Product Development, you know that we try to do a product freshening every three years and a whole new product every 7 to 9 years. Why is that?  It’s because of emissions. You have to do an emissions program every 3 years to make those vehicles compliant. If you’re going to spend $100 million to do an engine program, you might as well change the front and rear six inches so that you can market it to the customers as something new and get some pricing to offset that investment.”

But what happens when the vehicles have no emissions?  How quickly should they be changed?  Should they be changed at all?

“If you look at a 2022 Tesla Model S compared to the 2012 Model S, they look strikingly similar in terms of physical attributes. If you chart out all the improvements, it’s software, infotainment, the self-driving system and battery range technology. There are very little physical changes. They may change the grille a little bit or the headlights. But the sheet metal is essentially the same,” said Thai-Tang, noting that Tesla also employs a different business model – they don’t have a dealer network, and they don’t advertise their products. And their manufacturing practice is more simplified than Ford’s through the use of giga casting – a process that boils assembly down to just a few massive casted parts.

“They assemble their vehicles with essentially four large pieces – the rear end, the front right and left side and the middle, which is a structural battery pack,” he explained.

In a vehicle-to-vehicle comparison of the Tesla Model Y versus the Mustang Mach-E, Thai-Tang said a teardown of both vehicles showed that the Model Y has 40% fewer items going into the assembly plant than the Mach-E.

All of this is important to our bottom line, especially when you consider that Tesla made $6.2 billion in the first half of 2022, compared to Ford’s $6 billion – on one-quarter of Ford’s volume.

“They made slightly more than we did selling 565,000 vehicles. We sold 2 million,” explained Thai-Tang. “Their EBIT margin is 17.5% compared to our 8%. It’s very sobering.”   

All of the above, said Thai-Tang, was a driving force behind Ford’s decision to develop Ford Blue and Ford Model e as two distinct but collaborative business units.  

“We’re trying to capture the best of both worlds,” he said. “The expertise and industrial might of the Ford Blue business that we all know with fresh eyes approaching the BEV, digital business.”