ford’s new business unit
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FORD’S NEW BUSINESS UNIT
Caterina HAUTH * Fuad KARIMOV * Peter CHAMOUN * Souhila HADDAD
Mergers & AcquisitionsIUSE Madrid Business School
AGENDA
Electric car industry overview and analysis
Ford company Potential targets
Fisker Tesla Wheego Tango
Implementation strategy
Market Overview: Electric Cars US demand for electric motors is
expected to increase 4.5 percent annually until 2017 reaching $14.3 billion
Product sales will climb 2.3 percent per year to 1.4 billion in 2017
Electric motors are a key components in many durable goods
If manufacturing output rises, sales of electric cars are expected to follow
SWOT Analysis of the industryStrengths• Low Fuel consumption• Low CO2 Emissions• Much cheaper running costs• Green image• Fun to drive (high torque, low
noise)
Weaknesses• Higher production cost and
retail price than normal cars• Maintenance expenses are
higher• Battery replacement is
expensive• Low autonomy (between 100
and 300 km)• Long time to charge
Opportunities• Governmental incentive• Rising fuel prices• Legal regulations for low
emissions• Many (public and private )
investors
Threats• Skepticism from some
conservative sectors• Goes against the interests of oil
industry • Cost reduction in traditional
cars’ production
Porter’s Five Forces Analysis
Threat of new entrants: Medium
Government incentives result in an increase of the industry margins
Manufacturers of traditional cars may be moving towards the electric car market
“Going Green” image is good publicity High initial capital requirements Hard to get network of distribution channels
Porter’s Five Forces Analysis
Bargaining power of customers: Low
Not as many options as in the traditional car industry
Consumers have a larger knowledge of alternative vehicles due to governmental promotion
Subsidies offered to purchase these vehicles
Private consumers are to a large extent very responsive to prices
Porter’s Five Forces Analysis
Bargaining power of suppliers: Medium
Automobile manufacturers face low switching cost
They also control terms of supply and price However, they are more than ever
dependent on the suppliers industries Development and production stages of
batteries are an entirely new field for most manufacturers
Porter’s Five Forces Analysis
Threat of substitute products: Medium
Buyers are still reluctant to spend more money in an electric car than a regular one
Switching back to a regular car has a low initial price, but incurs in higher running costs
The tendency, however, is that the market share of electric cars is growing
Public transportation and other means of transport cannot match the comfort offered by a car do not pose a serious threat
Porter’s Five Forces Analysis
Intensity of competitive rivalry: High
Many manufacturers of traditional cars will start a line of electric cars to get a share of the growing market
Competition is centered in technology and innovation
In order to get access to technological know-how, vertical integration, joint ventures and strategic alliances are increasing.
Ford Motor Company
American multinational car manufacturer Founded in 1903 and established worldwide Sells automobiles and commercial vehicles under
the Ford brand Sells luxury cars under the Lincoln brand Target middle class people Revenue of US$ 136.26 billion in 2011 Introduced a sustainable energy strategy in 2011 They don’t have the expertise or the technology to start
producing electric cars Ford wants to study the possibility of acquiring or
starting a joint venture with one electric car firm
The Targets
Fisker automotive: overview
American company founded in 2007 by Hendrik Fisker and
Bernhard Koehler Mission: producing the world's first
premium hybrid electric vehicle Revenue of 2012 was around 200 Million
USD (about 2000 cars sold), starting price 100.000+USD
External Analysis
Target: people with high economic position,
high class people (celebrities and rich people)
males and females from 25-60 years old
Customers mostly from the USA (45
dealerships) and Canada (3 dealerships)
Hope to reach customers in China, England
and continental Europe
External Analysis
Suppliers: GP Supercars (Merano, Italy), Nellemann
(Copenhagen, Denmark); the Emil Frey Group (Zurich,
Switzerland); BD Otomotive (Istanbul, Turkey) and Al-
Futtaim Group (Middle East and North Africa)
Investors: Fisker Automotive's investors include
Leonardo DiCaprio, Palo Alto Investors, Kleiner Perkins
Caufield & Byers, Qatar Holdings, LLC, A123 Systems
and Ace Investments
Strategy
Fisker is a niche brand which is focused on using sustainable products to reach people who are interested in environmentally friendly cars
Not a “mass” producer Fisker should make an alliance with another
electric motors company to be able to lower their costs and cover a lower market segment
If Fisker continues like this, they will not survive very long because their total sale volume is very low
Wheego: overview
• Small, 2 years old, Atlanta company• Builds entirely electric cars• Manufactured in Southern California• Launched 1st car: April 22, 2011 (Wheego
LiFe)• 160 km per charge• MSRP: $32,995• 25+ Dealerships across the United
States
External analysis
Target: Wheego targets lower-middle class They have managed to significantly reduce
the production costs and make their cars actually affordable.
Investors: Mike McQuary, CEO
Suppliers: Flux Power for Lithium batteries Electric drivetrain produced and installed in
California
Strategy
Wheego targets middle-class buyers They offer safe and reliable electric cars
at affordable prices Collaboration with other companies can
be beneficial and viewed as positive for both parties
Tesla: overview
Publicly traded company founded in 2003 Founded by Elon Musk, Marc Tarpenning
and Martin Eberhard Produces a high-performance electric
sports car Backed by a number of high-profile
investors Price of a car is around 100.000 USD Revenue: 413.3 Million USD
External Analysis
Target: people looking for electric premium and sports, luxury cars
Rich and Affluent who are willing to spend more
Environmentally conscious customers
External Analysis
Suppliers: positive and high quality procurement process from Tesla through multiple suppliers
Car parts produced in France Powertrain built in California Battery cells from Japan
Strategy
Looking to lower prices for different suppliers to ensure savings overtime if prices were to be raised
Focus niche market (rich and affluent) Tesla tackles regions with higher gas prices, like
California, Hawaii, Alaska and New York Tesla Motor can merge with Toyota because they
already supply the company with control systems, batteries, and motor for the new Rav4
If Tesla did not succeed as an independent automobile manufacturer, it will still have the ability to produce the proper technologies for the big car manufacturers
Commuter Cars: overview
Founded by Bryan and Rick Woodbury Based in Spokane, Washington Produces ultra-narrow electric cars The first car produced was sold to George
Clooney in 2005 Their flagship car, coined Tango, is sold for
108.000USD It’s delivered almost finished, but the buyer
has to finish assembling it (8 hours work) Annual revenue: 1.5 Million USD
External Analysis
Target: Middle Class comprising (income group
10,000-20000 USD) Long term goal is to get the price to
10.000 USD For now, only rich people can afford the
car
Strategy
Commuter cars uses the differentiation market strategy Security: Tango cars have a narrow body
and quick maneuverability, it can avoid trouble better than any other car in existence
Driving experience: Tango accelerates from 0-60 mph in 3.2 seconds, has finished the standing 1/4 mile in 12.255 seconds at 106.86 mph, and can reach over 150 mph with no gear shifting
Implementation strategy
Which company is the right choice?
TESLA
Option 1: Starting a Joint-Venture with Tesla Reasons:
Ford needs an expert in the electric motors section and Tesla has the most experience in the electric motors sector
The high global distribution of Ford together with the expertise of Tesla would make a perfect match
Ford does not want to switch completely to the electric motors section. However, they want to target a growing market
Tesla current holds the biggest market share in the electric car market
WHEEGO
Option 2: Ford acquires Wheego Electric Cars
Reasons: Wheego has already managed to lower
production costs of their cars enough to target middle class, the segment aimed at by Ford
Together with the Global distribution channels of Ford, these cars could be commercialized all over the world at a reasonable price
Wheego seems to be affordable for Ford
THANK YOU FOR YOUR ATTENTION!Contact Information:IUSE Madrid Business SchoolCourse: Mergers&AcquisitionsProfessor: Mr. Hubert JooE-Mail: [email protected]