Why is Ford deepening its hybrid push? It comes down to one word.

By Emily Bary

Consumers are liking the value they get from hybrids, a Ford VP says

Ford Motor Co. expects that one fifth of the F-150 pickups it produces this year will be PowerBoost hybrids, as consumers show an ever-growing appetite for hybrid vehicles.

"We know the end destination on electrification and EVs" but "the tail on internal combustion engine and hybrid propulsion is much longer than anyone may have predicted earlier, a couple of years back," said Jim Baumbick, Ford's (F) vice president for product development operations and quality, in an interview.

Hybrids represent a sweet spot in the middle, and they're resonating with consumers for one reason most of all. "It starts with value without question," Baumbick said.

Read: Ford's stock gains after car maker announces plan to expand hybrid EV offering

Choosing a hybrid gives customers "immediate payback on the fuel costs," he noted, but there's also value on the power side. Baumbick said that the F-150's onboard generator, for instance, is far cheaper than equivalent external generators.

Ford commands nearly three quarters of the hybrid pickup market in the U.S., and the company said in a Thursday release that its hybrid Maverick truck is leading the way there, "at least until the new F-150 arrives."

"The F-150 PowerBoost Hybrid with available Pro Power Onboard is basically a mobile generator standing by to make customers the hero of the next power outage," the release noted.

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Overall, Ford is the No. 3 hybrid manufacturer. "We believe we're certainly going to be higher on the podium, and we think F-150 is a core part of that as we drive utilization of that power pack," Baumbick said.

The company always has "the ambition to be on top of the podium," but it's "for sure" looking to move higher than its current position.

Ford switched gears toward offering more hybrids last year, when the carmaker decided to keep investing in heavy-duty hybrid vehicles after it was surprised by their popularity.

"We wanted to give customers the freedom of choice and we knew it was going to be a portfolio approach to ensure we give customers what they need and what they want as we work through this transition," Baumbick said on Thursday.

Ford recently expanded its hybrid offerings, and now plans on offering a hybrid equivalent of its entire lineup of internal combustion-engine cars in North America by the end of the decade.

Hybrids have emerged as a bridge between wanting to eschew a gas-powered vehicle and balking at higher EV prices. Their continued popularity also underscores the difficulty of making a profitable EV at a relatively affordable price. Concerns about interest rates and uncertainty about the economy have highlighted that mismatch.

Hybrids cost less than EVs because their batteries are significantly smaller. Roughly a third of the cost of an EV is the cost of the battery.

Range anxiety is also less of a problem with hybrids, as plug-in hybrids in particular are capable of driving dozens of miles solely on an electric charge before their gas-powered engine would kick in.

And hybrids have one more critical advantage over EVs, experts have said: They can be produced and sold at a profit.

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GM has discontinued its mass-market Bolt EV, although it promised it'd bring back the EV in a few years and build it on its next-generation EV platform.

Both Ford and GM have slowed down their EV expansion. At Ford, that has included delaying or scaling down battery plants and reducing work shifts in making some of its EVs.

Last week, Tesla Inc.'s (TSLA) stock dropped after Reuters said the EV maker had scrapped plans to launch a cheaper EV. The "Model 2" was viewed as a much needed refresh for Tesla's lineup.

The risk for Ford is that reading consumer trends in the long-cycle car business can be tricky, analysts at UBS said in a recent note. Hybrids are "hot now," with U.S. sales of hybrid vehicles up 52% so far this year, the analysts said.

"Chasing trends in auto is hard as consumer preferences could change. If this occurs, and for instance EV demand picks up again, Ford may again need to re-time EV investment," the analysts said. "Maintaining flexibility is key."

Claudia Assis contributed reporting.

-Emily Bary

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04-11-24 1330ET

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