Ford sees big profits in ride-sharing
Romulus — Ford Motor Co. thinks new mobility services could yield profit margins more than double what it makes selling cars and trucks, and Executive Chairman Bill Ford on Thursday said that’s because the automaker is becoming more nimble and forward-thinking.
“In time, if we do this right, we will become less capital-intensive,” he said at the World Mobility Leadership Forum, a two-day conference in Romulus focused on the changing role of transportation. “We’ll have more revenue streams that aren’t dependent upon heavily fixed-costs investment.”
At its investor day earlier this month, Ford said new mobility opportunities like ride-sharing could earn 20 percent profit margins, compared to the 8 percent it has targeted for its core business of building cars and trucks. Ford said Thursday there’s no defined timeline to making those types of margins, and that the company will have to constantly reassess the services it offers based on how much money it’s making.
“We have to accept the fact we’re going to go down some blind alleys, launch some businesses that may not have acceptable returns,” he said. “But that’s all part of exploring and being on this journey we’re going to be on. If we’re not willing to do that, we’re never going to push fast enough and hard enough.”
CEO Mark Fields has said Ford has the potential to earn $3.7 trillion of the transportation industry’s $5.4 trillion in annual revenue from emerging mobility opportunities such as ride-hailing and car-sharing services. For many of those new opportunities, Ford said the automaker won’t be “just an assembler of other people’s technology,” and will be able to make money in new ways it hasn’t before.
Nearly two years ago, Ford launched a series of “smart mobility” experiments around the world. It’s now beginning to implement some of those experiments that it feels make the most business sense.
“You can’t be like a kid in a candy store and just grab every new technology,” Ford said during his address. “There are a lot of really interesting ideas, but medium and long term, is there a viable business model, can we make money off it? ... I’m very comfortable we’re doing that now, but it’s not a natural process.”
The automaker earlier this month acquired the shuttle service Chariot in San Francisco. The shuttle’s routes are crowd-sourced and send vans to wherever demand is greatest. Ford plans to expand Chariot to five other cities globally over the next 18 months.
It is partnering with bike-share service Motivate in the Bay Area to add bike-sharing stations and 7,000 Ford-branded bicycles made by Detroit Bikes by the end of 2018.
It also developed a City Solutions team to work with local governments across the country to help shape transportation offerings.
Ford recently formed a subsidiary called Ford Smart Mobility LLC to handle business decisions on new transportation services, and on Thursday named Raj Rao — an automotive industry outsider who most recently was vice president of digital innovation with 3M — as its CEO.
“You also have to run the business as it is today, and run it well and run it without distractions,” Bill Ford said. “We don’t need our whole company focused on this, we need a few of us focused on this and really thinking this through.”
Ford has been a champion of environmental issues and sustainability. Changes in mobility should ultimately make the world a better place, helping to reduce congestion in cities and give people ways to access healthcare and other services through transportation.
“It has to change in a way that benefits people, and not just technology for technology’s sake,” he said.