(Bloomberg) -- Ford Motor Co. is changing gears again in Mexico, shifting planned production of a small electric-powered sport utility vehicle to a plant south of the border instead of a Michigan factory.
Sending the electric vehicle to Mexico, where labor costs are lower, will help the business case for the costly model. It also risks raising the ire of President Donald Trump, who had been sharply critical of an earlier plan by Ford to build a small car factory in Mexico that the company ultimately canceled.
“They have to do what’s best financially and this electric vehicle is not going to be huge” in terms of sales volume, said Michelle Krebs, an analyst with car-shopping website Autotrader. “It’s not like they’re not putting money into the U.S.”
Moving production of the as-yet-unnamed electric SUV to Mexico will allow the carmaker to boost planned output of self-driving vehicles at its factory in Flat Rock, Michigan. Ford is boosting its investment by $200 million and adding 150 more jobs to the Michigan plant as part of the shift, Jim Farley, Ford’s executive vice president of global markets, said in an interview. The driverless car is to debut in 2021.
The SUV to be built in Mexico starting in 2020 will go 300 miles on a single charge and is the centerpiece of a planned $4.5 billion overhaul of Ford’s lineup to add 13 electric or hybrid models, including a gas-electric F-150. Ford has been viewed by Wall Street as playing catch-up to rivals such as Tesla Inc. and General Motors Co., which already sells the battery-powered Chevy Bolt and plans to introduce robot taxis in 2019.
“Our ambition for electrification is not modest,” Farley said. “We’re going for it. We think electrification is a significant shift in propulsion for our industry.”
Ford’s chief executive officer, Jim Hackett, has been accelerating the automaker’s moves in electric and autonomous cars, while announcing $14 billion in cost cuts to improve what he calls the company’s “fitness.” After replacing Mark Fields as CEO in May, one of Hackett’s first moves was to shift a plan to make the Focus small car in Mexico to one of the automaker’s plants in China.
Trump did not tweet his displeasure this summer with Hackett’s plan to build small cars in China to be exported to the U.S., nor has he blasted the automaker after news broke Wednesday of the electric SUV’s shift to Mexico.
“Automakers have been out of the line of fire of late with so many other issues brewing in D.C.,” Krebs said, adding that the impact of the president’s planned changes to the North American Free Trade Agreement represents an “unknown” for Ford as it shifts the electric SUV to Mexico.
Farley said it is too early to tell how possible changes to NAFTA could affect Ford’s Mexican output, but he said the automaker couldn’t wait to make a decision on where to build the electric SUV because it goes into production in just over two years. He characterized Ford’s move as “first and foremost an announcement of incremental investment in America.”
“Our growing ambitions in autonomous vehicles really means we don’t have room” for the electric vehicle at the Flat Rock factory, Farley said. “We had to come up with a different manufacturing strategy for our EV.”
The Wall Street Journal reported the automaker’s change of plans earlier.
The self-driving car Ford will build in Michigan will be a vehicle specifically designed for ride-hailing and delivery services, Farley said and described in a Medium post Wednesday. The automaker will begin testing the car in an unnamed big city next year, Farley said.
“We’re going to go and start to test our business model in a city next year,” Farley said, citing the company’s recent partnership with Lyft. “We’re not just going to be testing autonomous vehicle miles. We’re actually going to be operating our business model in a city, delivering goods and people, live."
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