Ford rolled out its 2024 Mustang in mid-September. The iconic car has an enviable pedigree in America with the original model dating to 1964. But this was no ordinary auto pageant. The buzz centered on the fact that Ford has fitted the model with an internal combustion engine, despite its commitment to bolster electric production.
Cars with gas-powered engines are now the centerpiece of Ford’s cash-generation strategy, as the automaker positions them at a premium sales price. While Ford did not disclose the base sticker for its new Mustang, we expect to see the 2024 model reach toward $40K-to-$45K for the no-frills package. You can add another $10K-to-$15K for premium features. The Mustang will help to subsidize the company, while Ford sorts out its future with new-generation vehicles.
Ford does offer the Mustang with an electric engine, but we wage that the muscle-car crowd has not taken too kindly to it, although corporate spin suggests otherwise. At least with this model, the company’s marketing department hit the pause button with its long-term transition strategy. Ford essentially implemented the hedge it created when it split the company into all-electric and conventional businesses earlier this year.
Ford has not drawn a line in the sand on becoming an all-electric company. General Motors, in contrast, claims it will meet its mark over the next decade or so, conveniently aligned with California regulations. The state with the largest economic footprint in the nation will prohibit sale of new, but not used, gas-powered cars in 2035.
You are seeing even further segmentation of the auto industry. Manufacturers will set aside a few brands with gas-powered engines that command a premium price, if for no other reason than to satiate middle America. Buying an electric vehicle may be de rigueur on the East and West coasts, but the love-fest stops there. One of our colleagues recently visited a US car dealer in the South to ask about electric options. The unexpected retort from the salesman: “Why would you want to buy a car with range, refill, and resale issues?”
The dark secret in this industry may be that investors are willing to value Tesla like a tech company, but they are unwilling to offer the same stock-price benefit to Ford and General Motors. The Detroit giants are bound to classic valuation metrics, including profit margins, sales, and market share. And that in-the-trenches reality will slow their much-heralded conversion from internal combustion engines to electric ones. They will hold dearly to the business they know, regardless of their public-relations efforts. ■
Our Vantage Point: In the United States, an all-electric automobile industry may prove to be a pleasant fiction. The Detroit giants are beholden to convention, not aspiration, at least for the time being.
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