Ford emphasizes flexibility with new hybrids, expanded gas lineup

Ford Motor Co. executives know the electric vehicle transition is proving to be more costly and uncertain than anticipated, but they're not worried because of the rest of the lineup.

The automaker has positioned itself to continue making money on internal combustion vehicles to help fund its EV ambitions, while also ramping up hybrid sales for customers who are not quite ready to make the full leap to battery power.

"You have to have a compelling product road map and you have to have very flexible manufacturing," CEO Jim Farley said on the company's July earnings call. Farley said Ford used to have a portfolio with "too many generic vehicles" but now has "infused it with passion and purpose."

Beyond the vehicles, Farley said Ford is working to expand its software and digital services. Whether that's a commercial vehicle subscription for telematics data or an upgrade that adds battery range or horsepower, Farley said the company is learning what buyers want.

"These experiences that will drive higher profitability — accretive revenue — and are the reasons for customers to actually stay with Ford and Lincoln — lower marketing costs — are now becoming clear to us," Farley said.

Ford is targeting $1 billion in revenue next year from software; it had roughly 765,000 paid subscriptions as of the second quarter. Farley said software revenue has gross margins above 50 percent, which can help make the company less dependent on the usual ebbs and flows of the industry.

He said Ford still has "plenty to prove," including on vehicle quality and continuing to build out its software capabilities, but it believes it's on the right path.

"Plenty of work ahead, but the direction is crystal clear to us," Farley said. "We are building a high-growth, high-margin, more capital-efficient and more durable Ford."