Ford is shifting its focus towards smaller electric vehicles (EVs), but the question remains: will a nation that loves its SUVs actually embrace them?
Currently, the company produces only one “car,” the Mustang, but it has realized that to make EVs profitably, it needs to manufacture smaller vehicles compared to the large trucks and SUVs that have dominated consumer demand for the past thirty years.
The more intriguing part of this is the follow-up question: will American consumers be willing to buy smaller cars? Observations often highlight that, in the U.S., “small” cars are commonly associated with being “dinky” or “unsafe.”
Sure, a Mini Cooper might appeal to some, but would you feel comfortable putting your child in something that small compared to a large Ford Expedition? Dr. Drury points out that car buyers often prioritize more than what they actually need.
“We really do buy vehicles for the future and not the present,” he says. “Like when you have family members visiting, you think, ‘I need a seven-seater,’ even though you’re driving alone 99% of the time.”
This reasoning frustrates me. For most people, a car is the second-most expensive item they own, next to their home. Unlike items such as clothes, shoes, or cookware, which we might collect based on different needs, a vehicle is something we typically buy once and keep.
In my case, I mostly drive alone in my Mazda CX-9, a three-row SUV. I rarely have more than three passengers, leaving the third row empty.
However, there are occasions when I need to fit seven passengers. Should I ignore this need when making my purchasing decisions? Additionally, the third-row seats often fold down, offering extra cargo space.
In reality, I already make compromises. Several times a year, I wish I had a larger vehicle, like a Chevy Suburban, to help transport a large Home Depot purchase or more easily load up for vacations. But, the higher upfront costs, gas, insurance, parking, and handling don’t make it a worthwhile trade-off.
As lithium-ion batteries become cheaper, large EVs should decrease in price too—at least, that’s what companies like GM are banking on.
However, the economics of car manufacturing are different in the electric era. For now, large EVs will be more expensive to produce than their gas counterparts, and much harder to profit from.
There’s another, more pressing reason for American carmakers to start downsizing: they face competition from Chinese manufacturers, who are producing smaller, cheaper, more advanced EVs that are profitable.
If Ford can’t compete with the Toyota Camry, how will it compete with BYD’s $11,500 Seagull? BYD already sells its models in many countries, and last year, the company outsold Tesla globally.
American companies cannot compete on price with Chinese manufacturers who use cheap labor. It’s no surprise that a Harley Davidson motorcycle costs more than the Seagull, given the higher wages American workers earn. The parts and labor costs are simply higher in the U.S.
But, if Americans are drawn to affordable vehicles like the Seagull, could that be the solution?
Ford’s answer is a new EV program designed to create smaller, more efficient, profitable electric models, ideally priced from $25,000. GM and Stellantis are also planning similar moves, such as the revamped Chevrolet Bolt and Jeep Renegade, both potentially priced under $30,000.
To convince American buyers that smaller cars can be appealing, automakers will have to emphasize the inherent advantages of EVs. Since EVs don’t need space for a traditional engine, these smaller vehicles can be designed with more interior room.
Great compact EVs could result from engineers being forced to rethink what makes a car desirable, according to Drury from Edmunds. “Necessity is the mother of invention,” he adds.
In an ideal future, Ford could sell EVs for just double the price of foreign competitors, while changing consumer perceptions about the size of vehicles. But there’s still the matter of this:
Americans must realize that they might not need the largest SUV for that one weekend a year when family comes to visit. Convenience often takes precedence over environmental concerns, real or perceived.
In one survey, American consumers said they couldn’t switch to electric vehicles until they offer a 500-mile range and can fully recharge in minutes.
But in reality, most of us drive 40 miles or less daily. Shifting such deeply ingrained attitudes might be tougher for automakers than simply transitioning to battery-powered vehicles.
It’s true that if someone only needs a large vehicle for one weekend each year, it doesn’t make sense to buy one. In those cases, other family members can drive their own vehicles. However, the reality is that few people buy large SUVs for just occasional use.
Maybe they need to haul large items sometimes, or they enjoy the feeling of safety and higher vantage points these vehicles provide—especially when most other cars on the road are also large.
However, scolding consumers for their driving habits isn’t a substitute for making great EVs. Chinese car companies have already shown how to make high-quality, affordable vehicles, and they’re now expanding into the U.S.
If American companies don’t adapt, the American workforce and technological innovation could suffer. U.S. automakers may have no choice but to stick with gas-guzzling trucks and SUVs as a response to the affordable foreign competition.
It’s futile to pretend that there will come a day when American companies can compete on price with those using cheap labor from authoritarian countries while paying American workers a fair wage and adhering to environmental and safety regulations.
To get Americans to buy smaller, domestically produced vehicles, the free market alone is unlikely to achieve that.
We could impose tariffs on imports to level the playing field with cheap foreign labor, but this would increase costs for U.S. consumers and disrupt the global order that has been established over the last 80 years.
Alternatively, we could raise CAFE standards, making gas-guzzling vehicles more expensive. But this would harm consumers, forcing them to settle for vehicles they don’t want or pay more for ones they do, while being unable to afford other necessary purchases.
Another option is to heavily subsidize the purchase of American-made EVs, but this would come at a significant cost to taxpayers.
There may be other solutions yet to be considered, but the reality is we won’t simply innovate our way out of this challenge.