Ford Motor Company (F) Earnings Call Transcript & Summary

All right. Hey, everybody. I'm Durgesh Chopra, power and utilities analyst at Evercore ISI. And I'm thrilled, and I welcome you to our keynote breakfast session at our ninth Annual Evercore ISI Utility CEO conference. So in a minute, you will hear from our guest speaker, which will be followed by a Q&A that I'll moderate, and we'll leave plenty of time for questions at the end. So with that, very excited to have Ted Cannis joining us today. Ted Cannis is the CEO of Ford Pro, the global business and brand within Ford dedicated to delivering the world's most comprehensive suite of solutions to government and commercial customers. Appointed to this role in June 2021, Ted leads Ford Pro's global team, which is a one-stop shop providing a trusted productivity platform of vehicles, software, charging, financing and customer support to serve commercial customers of all sizes in different industries and is leading the transition from gas to electric vehicles for commercial customers. Ted began his career at Ford in 1989 and has had several key leadership roles at the company, including General Manager Commercial Vehicles, Global Director Battery Electricity Vehicles, President of Ford Argentina and several other leadership roles in U.S. and globally within Ford's finance organization. Ted is a graduate of Indiana University with a Master's Degree in Business Finance and holds a bachelor's degree in philosophy from the University of Michigan. So we're delighted to have him here with us today. And Ted, really, really thank you for your time. And so with that, I think we're going to play a quick video before Ted comes up. [Presentation]

So good morning, everybody. So during the COVID process, I decided I will never wear a suit again. I'm swag only. So this is what you get. And when I was running IR and Ford X years ago, I always used to be able to tell who are the investors and who is the company because the investors were all wearing vests. But clearly, something happened during COVID so it's harder to tell now. So it's great to be here. It's an unusual thing. We're in a different place now because a lot of you in the room on the company side, you are now our partners and collaborators. You were always customers. I will check-in the list of companies here today. 50% of you are heavy Ford customers, about another 40% have a lot of Fords. It's a big business for us. But now we're in this together. And if there's a message I want to say to you guys, that's what we're here about. We're in a different place, it's a big growth story. We're talking big growth. And we're trying to figure out how to get through it because we're in inning 1 barely. And that's a bit what I want to talk about, what we're doing and what we're doing with you guys, many of you in the room, some we can talk about, some we can't. But it's an exciting, exciting time. So a couple of things I'd like to say as we get started. So we formed up this Ford Pro commercial business a couple of years ago. And the target was really to streamline all the focus on commercial and government customers, B2B businesses, not just the vehicle, but it's 2 major things are happening for us in the vehicle space. One, electrification, why we're all here today. But the other one is the software capability vehicles. These are smartphones on wheels. It's kind of like our houses. A few years ago, we didn't have Nest in that house to manage the temperature and optimize the climate and cost and I forgot it on vacation and I forgot to adjust it. Now you got that. You got a ring watch in the front door to see if anybody has delivered a package or stealing anything. The whole house is connected, and that is what's happening in the vehicle space. Modems are in the vehicle. I can manage the vehicle health, I can imagine how the drivers are working, are they idling, are they in the wrong place, are they going to be a liability for my insurance and connecting that way with the service physical capacity in the network and bringing this all together and not just for the big companies. Big companies have staff of people, SAP, IT departments, but the small and medium business doesn't. And this matters even more for electrification. So a big company might have a team working on how we're going to meet our sustainability goals. But a small and medium business, they want to go, but it's complicated and confusing. They were buying oil before. What the hell is a kilowatt? I don't understand anything. And there's so much confusion and education out there, which is why we have huge roles together. So I'm just going to take you through a bit of our business to give you some context. And as we said in the beginning, Durgesh said, before I was running the commercial businesses, I was Ford's global lead for electrification, going around 6 times a year to China and Europe and North America to come up with products like Mustang Mach-E, the Lightning and E-Transit, talking to customers all over the place in high-density markets like Norway and California to low-density markets, how do you get this adoption rate? Because these early years, it's not everybody. It's the front end of the S curve, and it's a different kind of customer. And if we just read the miles on the type driven everyday it isn't actually going to tell the story of what needs to happen and who's going to buy and where the infrastructure is going to go. So with that as an overview, we'll just jam through some slides so we can get into the question and answer, if it's helpful. Next slide, please, whoever is rolling, or not. And if it's me then I'm in trouble. And the transcription people must be nervous now. All right. So Ford Pro, and this is going to tell you what we're doing, but it gives you some context as in my space where the commercial customer is going. Yes, I can give you some of the differences between retail and commercial customers. So first, we're -- our goal is to accelerate productivity for your businesses running bucket trucks or to a guy who's plumbing because what you want to do is what you do. You want to fix lines, roofers want a roof, plumbers want a plumb. They don't actually want to work on vehicles. Their goal is to be doing uptime running their business, and they buy the tool for the job that they need. If a V6 engines will do, why would you buy and spend more money on of the V8? And it's a very scientific business. It's like us. You've got Excel spreadsheets, return on investments, total cost of ownership, mentoring, fuel, repair, residual values of the vehicle. It's a different conversation than a retail electric customer. Retail customer, they're buying on a mic. Why do you have a 7-seater vehicle? You only have like 1 kid. We might take the soccer to practice and visit Grandpa with a load. So have you ever ever used 7 seats? No, no, never used it. Have you ever towed anything? No. But just in case, I bought it. That does not happen in the commercial world. None of you are doing things just in case. You got to have it, and that's a plumber in Michigan, who's got customers in the neighborhood isn't going, "I wonder if I should go to Chicago and drive all day to get a client over there." It's a completely different business model and a completely different conversation. We have the widest range of commercial and electric vehicles in North America, and later today, we also talk about how great we are in Europe, 7 years of leadership there. So we have a pretty good perspective on this space. And the goal is to have this always-on capability. Now we're modem-connected, how can you connect all of these services together digitally? And that includes with you guys on the utilities and charging the data on that side of the business and integrate it into one digital dashboard. We all came out of COVID, and we had to get all our reference material online. And the customers are expecting a suite of solutions that work together online, not a bunch of fragmented solutions that don't work together. And if you buy software from here and a charging solution for there and a charger from here and you -- something goes wrong, it all starts to fall apart. Well, who is it? Was it the vehicle, was it the firmware was it a cloud problem? I don't know. And so what we said is we're going to pull those altogether. If there's a throat to choke, it's mine. We will solve the problem and it's our problem to handle. So that's a high level of what we're trying to do. What does Ford try to do on electrification? If we go to the next slide, please. Maybe I should just -- before we go to the next slide, something on everybody's mind, demand. Are we in a recession? Are we not in a recession? In our case, demand is very strong. In the commercial space, both here in Europe, just got back from Germany 2 nights ago to come here, the commercial side has been so underserved. You guys screaming for bucket trucks, guys waiting for 5G, infrastructure bills, the delivery economy. People have a new way of life and they need a lot of vehicles. Walmart wasn't delivering products to your home before. Now they need a lot of vehicles to do that at our case. So it's a completely different economy. And what we see is a lot of pent-up demand in the commercial space. So between the infrastructure policy in IRA, in our case, with electrification, sustainability objectives, returning over of fleets to hit their numbers that they have already committed to, we just see a huge amount of demand. And that's what we're in. Unfortunately, on the supply side, the situation remains tenuous. We expect the chip situation to get a little better this year, but it's still an ongoing issue. We expect other issues to get better, but a tight labor market, it's tough for the plants, it's tough for our Tier 1 suppliers and it's tough for our Tier 2 suppliers. The system is so thin, anything kind of scrambles, there's no room for makeup. And so the labor situation, I'm sure that you are facing as well is a constant challenge for us, which means it's a constant challenge to provide vehicles to our customers, in some cases, very long waitlist. So that's a bit what's going on there. And that includes all the way through the supply base is securing the battery supply. From battery supply from facilities on the electric side, which I'll talk about in a second. So we'll go to the next slide, please. So what are we doing at Ford? We're going to invest $50 billion are investing between now and 2026. We have huge new facilities like we're putting in Tennessee and Kentucky for the next-generation F-Series, $11.4 billion, including some partnerships with some of you in the room. And we're investing in another facility in Ohio for another next-generation electrification commercial vehicle. We've got new battery plants going up around the world because we need all that gigawatt capacity. So we're all in. This is where it's going, and we see the demand every single day. If you go to the next slide, please. So our view of the moving is 50% of global sales will be electrified for us by 2030. That's a huge rate of increase from today. That means a lot of resources investment through the entire chain. And we are already moving that numbers behind us. When we got like the Lightning orders last year that we had 200,000 reservations and had to shut it off, we rapidly increased our whole planning projections and supply chain for Lightning. So we -- the final numbers last year were 15,600 Lightnings, which I'm happy to say, one motor truck of the year 2 days ago and Motor Trend Truck of the Year, et cetera, et cetera. But this year, we're going to ramp up on Lightnings to over 150,000 annual production rates by the end of the year. And in total, across the Ford system, 600,000 units of annual production rate by the end of this year. And we've got 70% of the -- 100% of the raw materials already secured in for that one because that was the key. And that's a key partner for you guys because you're working with a lot of companies, and there are a lot of promises out there. But do they have the raw materials? Do they have the battery plants? Can they produce vehicles? And we're going to get to 2 million EVs of production rate globally by 2026, and we got 70% of that supply locked down. And that's a lot of effort going flying people out to Indonesia to book agreements to make sure we can get nickel and lithium and the other products around the world. And our goal, we were #2 in the electrification market in the U.S. last year. And our goal is to be the #2 guy, and we have aspirations to be the #1 guy, not proud enough of us to get there yet. But #2, where we're looking at. And in the commercial space, which you'll see in a second, we're particularly strong and have a lot of additional benefits that we can offer our customers there. So if we go to the next one. So what's our perspective on the commercial business and why it's worth listening to what we have to say as we interface with our fleet customers in the U.S. and around the world? So we have 40% of the Class 1 through 7 full-size trucks and vans in North America, F-Series pickups, Super Duties and vans. We're a huge player, basically about double the next person. We lead in the commercial vehicles in Europe for 7 years straight with growing share. So we have a lot of synergies, and we can see pretty far across the world. Trend is the best-selling cargo van in the world. F-Series is the best-selling vehicle in America for a long time and 46 years of leadership. And where we're not leadership around here, Ranger, the small pickup and the rest of the world is #2. So we see a lot of where our commercial customers are going, particularly these vehicles that require a lot of fuel. And if we're going to save the planet, we need to get those moving and they drive longer miles per day, heavy usage, continued usage versus variable retail usage. So that's a bit of the perspective we have coming in. And the average commercial customer rotates their fleet 10% to 15% per year. Just like you guys who are making capital investments and whatever you're making in, nobody does it all at once, all your laptops will change them all one day. No, no, it's a constant rollout of capital investments. So they're going to have internal combustion and battery electric vehicles for a year. And some of the vehicles are going to take longer. Super-duty heavy truck, bucket trucks is a lot of energy with bad aerodynamics moving up and down highways. When you guys have an emergency, you have to go across state or across country, and it's not always there yet. And we can say that because we have both internal combustion and battery electric. I don't want to sell you an electric vehicle that won't let your job get done if you're working on lines or if you're in forestry or you're an ambulance. We can't afford that the customer can't do their job. Roofers got a roof. And so for us, it's very easy. We have a great internal combustion solution for you. You can get an F-150 hybrid, just as much as you can get a Lightning. And that is a huge part of it is eliminating these miss that the EVs are all perfect. They're not all perfect. They don't do everything yet. They do a lot of great things. I have a Lightning, and my wife has a Mach-E. We are 100% electric. But it doesn't do everything. It does a lot of things better, and other things like towing long distances in the cold is not ideal. So that's the perspective where we start from. So next one, please. So what are we doing in the commercial electrification? So we see accelerating adoption. We did a survey of 1,200 fleet decision-makers across North America and Europe last year. And about 60% say, "Yes, yes, we're going to get one or we're going to try one." And the larger the company, the more likely. Also, 60% says, "Yes, but it's going to be a major headache and particularly charging." Because fleet customers, like retail customers who have not had an electric vehicle before, they think they're going to go out and charge in a while. "I'm going to go to a public charger." That's what they all think. We all know that 85% of the charging is at home, but that's what they think because for some reason, the charging industry decided to go away from branding and signage. Everything else, Applebee's, McDonald's, Shell stations, where are the chargers? Where is the big signs? It was like, "You don't see them." It's like -- and until you put them in software to go find them, they're kind of invisible. It's kind of like Pokemon Go. You can't find them anywhere. So 60% of our managers say they're going to go into electrics, and they have a lot of new capabilities, quiet, you can drive in the neighborhoods at night for commercial vehicles because they're silent, where there's noise restrictions and working restrictions for commercial vehicles. You have new spaces like frunks where you can put and secure lockable storage, the only reason I ever went to a pickup. I didn't know where was they going to put my stuff? I'm not going to have a slide around the bed all the time. I wanted somewhere I could lock stuff in the vehicle, pro power onboard to power up your tools, your tailgate, frontgate, whatever you're going to do. It's got new capabilities they never had before, plus other capabilities. If you go to the next one, please. So here's our plan as we go forward globally. So in E-Transit, we're #1. We have 70% of the share coming out of last year. We're going to have global production rate of 150,000 units annual rate by the end of this year. F-150 Lightning, 150,000; Mustang Mach-E, 270,000. We sold about 40,000 Mach-E's last year, and it just continues to climb and demand is strong. So that's kind of what we're looking at. If you go to the next slide, please. So what did we have to do? So our commercial customers are confused and they want a lot of help. And we didn't want to have an air state. The key part of us to accelerate the move to electrification is to make it easier. There's a lot of nervousness, there's a lot of confusion, the programs, how the vehicles work, where to charge. So how do we eliminate as many as variables as possible so people can make decisions, good decisions as fast as possible? Get the right infrastructure and the right product and make sure the product can do the job. So we created Ford Pro charging, and we bundled those 3 things together. We have public charging because they think they're all going to charge in the wild, they think they're going to do a lot of public charging. Now really, no company wants to do public charging. What, I'm going to have an employee paid sitting at a charging station at dwell times. It's not good math. But you have to have a solution in case of emergency, you have to. So we take advantage of Ford's roaming network which is one application that you can roam from instead of all the different sign-ups, you can go to EV Go and Electrify America and CMA Connect and then 1 tool to roam across the network instead of a whole bunch of sign-ups, which is particularly important when you have drivers, you don't want them pulling out a credit card and having to sign out forms so they can charge. They need an easy way through an application. They don't have a bunch of RFID cards and everything else that they need. So we have that because they need it just in case. But the more important part was home and depot charging, home charging. They have to take the vehicle home. They're a service and maintenance company. They take their vehicle home. They got to split the bill between the refrigerator and the company. So driver reimbursement is key. We learn from early days in plug-in vehicles, the drivers forget to charge their vehicle. So we have to have warnings to the fleet manager or the driver, "Hey, notification, you forgot to plug it in because otherwise, you're not going to be able to work tomorrow." So those kind of things are services. Preconditioning the vehicle, "Hey, it's cold. Let's reschedule. You have a 9:00 work start." You guys can set up his fleet. Let's warm up the battery chemicals so that you can get adequate range when you come out of there and get as close to optimal range as you can. And by the way, the cabin will be nice and warm as well. And that's a key part of the process. And the last one was depot on-site charging. So Hey, if you have a warehouse or your vehicles are there at the facility, we'll set up the depot work. And all of this has to work with the utilities, with you guys in the room as partners or it won't work. And that allows us to manage the flows and come up with turnkey solutions. We'll do the advising. Is this the right vehicle for you? Hey, what's your mileage, you're in Quebec. You have a big up fit with -- we have 1 guy who had carrying glass on the side of his van. So the mileage is going to be way down. It was like having a parachute on the van, and they're in Quebec. And you're like, hey, you know, we're not going to sell you the vehicle. It's not going to work for you. We have internal combustion vehicles. When the time is ready, we'll come back. But this isn't going to be a good fit for you. So that's what we do a little bit on the front end. We do coaching and counseling, we help them do the planning and deployment and we work with them and you guys to install the whole solution for them. And when something goes wrong on the operations, then they know who to call. If it's the charger or it's a maintenance issue or it's a vehicle or a firmware issue or it's a cloud issue, the whole thing, and all managed with software so we can maximize the time of day rates. They want to minimize their kilowatt costs so we want to make sure they're charging at the right time of the day. Next one, please. So this is kind of the comprehensive plan that we work with and working with you guys in a lot of the utility costs of country as we put in these installations. So first, you have the vehicles. They are purpose built to maximize the electrification process, estimate the range and make sure we protect the battery so the customer gets that batteries for as long as possible, including training and tips on the process, preconditioning and battery care, managing the customer information, "Hey, did you know what you're doing, there's a better way to drive or improve your capability there?" The seamless operations, if something goes wrong, notifications, charging, explanations and support when they have issues with chargers or service or working with you guys. On the telematics, providing them information about the vehicle health, driver health and the structure -- and status of their charging network. And where they are, if they want to rebalance their fleet, match drivers to different jobs on different days with remaining charge in the vehicle, make sure they don't go off peak rates and do -- have some unfortunate monthly build that they were not expecting. And then we integrate the driver reimbursement process, we have the build services and then these complete solutions. So this is what we're doing on this planning, operating and deployment process. If you go to the next one, please. But it goes beyond that. One of the key goals when we came out with Lightning was not just that it could do new capabilities like frunk or Pro Power Onboard to tools and other capabilities is, can we do it as a backup power to the system? So working with Sunrun, we're doing bidirectional power to do the intelligent backup. Your generator goes down, I love Michigan, a very heavily wooded area and we are always down. But I love DTE, that's out this question. But it's just the nature of where I am. And we have to have a generator in the house. Well, now I have a better solution. I got a rolling generator on wheels all the time. Most of us are not using the vehicle to its maximum driving range. We may have one long trip. But basically, back and forth to work back, back and forth to school you're not going to use that huge battery, and the large Lighting is 320 miles and 240 on the shorter range battery. So we're going through that. We're also working with a lot of you on vehicle to home solutions, so we can -- how can we manage that load in the house on a dynamic basis too if you have solar and the rest of the solution. So where do we go with that? I would say we're doing that also, piling on the commercial side, a bit more complicated because the residential power 240 volts versus the 3 phase on the commercial side adds quite a bit of complications. And each of the utilities operates in a different model. Very complicated for us to interface. I think it's about -- we see about 100 utilities cover about 70% of the population that we need to do. But a lot of you, all different interconnectivity, different programs, different capabilities, and it makes it quite complicated to map out a solution that works and [indiscernible] repeat over and over. And you all have different regulators. So we -- that's one of the challenges that we have of really optimizing the grid capability and the resilience opportunities that we all have. But we're in that process. And as we close out here, next one, please. The other one is the data. You guys are trying to figure out, where should I put it? Are they going to add a fourth house in the neighborhood and trip over the substation or some sort of infrastructure problem? Our problem is the customer, and they don't know this many times, they'll call, "Okay, I want a E-Transit today." Do you have a charging solution? No. And so then they're going to be end up public charging all the time, paying a lot of money, higher cost for the charging generally. They're going to have employees paying sitting there charging. So what we need to know, and we do now is, okay, they want to set up charging. We get that ready, then we can start the build our process before the vehicles come. And that's what we really need a lot of help with the utilities on, "Hey, working with you, here's charging locations that's coming. Here's a company. They have a charging plan that they're putting it forward. Let's work together on hiring out that plan." And because it's commercial customers, they know generally how many miles they're driving. They've got that done because they're doing cost expense reports. The COO wants to know how the business is going. They're managing all that. So they know what kind of flow is going to be there, which is really helpful because a lot of us when we were trying to figure out who's going to use electric vehicles, we all look at miles driven. But miles driven is not that helpful in this space. It's energy used because whether it's sitting and idling or it's in winter, it's not the same when you don't have the heat of an internal combustion engine keeping the thing moving. And so the management and triangulation of how much energy usage, who will go first, what kind of businesses are best suited to the vehicle fit, it's not an easy science or it hasn't been for us and a lot of learning along the way to predict where the loads and use cases are best matched up. So part of that is the data, the health insights of the vehicle, how the charge management is going. Public charge management is complicated. There's a lot of maintenance issues. It's down, it doesn't connect well, especially on the DC side with an inconsistent set of standards that are a bit loose. So working through that to ensure system reliability for our customers and drivers to, hey, this is where you can have confidence of where to go. And all the other charging ports that we have to optimize charging times, rates and loads on our depots and to minimize the cost there. So that's what we're doing, and that's a lot of what we can make available to utilities with the customers' consent of course, is in that planning and usage process of how collectively we can optimize and see where we go forward and put the infrastructure in. If you go to the next one, please, and then we're almost out. Utilities customers. So first of all, you guys are our customer. We provide a lot of vehicles to the utility business. And we love the business, and thank you for all of you who are loyal customers. We really appreciate your business. And in this space, we're doing this together. There is no electrification without the utilities, and we have to work on a plan. So you're also a customer as we roll out charging businesses and to support our customers in that process. It's not like I'm trying to make a lot of money on AC chargers. It's -- I have a $40,000 Super Duty and an AC charger isn't it? But what we do, do is when we talk about commercial customers and say, "Hey, look, an AC charger will work to charge you completely overnight, 8 hours, 10 hours, you're good." You don't need to have -- as they often come in a DC charger, I'm a jam [ it for ] kilowatts quickly. You don't need that. It's a huge amount of money, infrastructure and time to put it in. An AC charger will do the job. And we put an extra inverter at our expense and wait on F-150 Lightning with the big battery so that you can do more fast charging at home and completely charge it overnight on a big battery, residential or commercial. So our goal is to make the vehicles ready for, whenever possible, Level 2 charging at home or at the depot to eliminate loads, reduce infrastructure costs, reduce pressure on the battery and make it all easier. So the data services, we can work together on as well. And then as partners, one of the big things we're doing, we just work through our dealers. We have 3,000 dealers in the U.S. And of those, 650 are commercial specialists who really dedicate commercial customers, bigger bays to fit a transit or a bucket truck, capabilities to work with those larger engines, for example. But they also just had signed up to be EV certification at our next level. 1,904 dealers, and about -- those about 1,700 said they're going to put in DC chargers at all locations by 2024. That's a big commitment affecting a lot of utilities where we will need support, but it allows not only Ford's roaming public charging network, now you have our own internal DC charging network across the bulk of the high-volume part of the country. So that's a huge project, which we'll be working with many of you on to get your help. Infrastructure, complicated, it's complicated to get EVSE and charges approved through the systems. Is it the right one. It's complicated to do the financing programs. Many of you have make-ready programs for us. But that is a confusing story to the customer. And the confusing story continues with IRA. By the way, Inflation Reduction Act for our commercial customers is fantastic, especially for small and medium businesses. There aren't the strings attached on where the chemicals come from, are they built in the U.S., et cetera. There isn't pricing. It's $7,500 if you're a tax-paying customer. And you include municipalities and state governments as well who also can generate. So $7,500, if you're trying to decide, am I going to electric? A big company, you've got hundreds in the fleet, you can afford to pile it. And -- but if you're a small business, you have 3 vehicles and you want to go electric and just wing it, that's a pretty big risk to your personal business, having $7,500 to help and you make that decision and help with some of the infrastructure process. And for those of you who have infrastructure programs, it really makes it easier to make that change. And even though you hear all the talk about delivery vehicles going electric, and of course, we sold thousands to -- 1,100 to Walmart, for example. We designed 8 versions of Transits, 3 different roof heights, 3 different lengths, chassis, et cetera, because only 10% of the van business in America is delivery. It's plumbers and construction, it's your HVAC guy coming in, service and maintenance vehicles. And those guys are going electric as well. About 60% of ours have medium and low-roof vans. They're not just giant events. A lot of them are something like 40% are small businesses, 25 vehicles are less in their part. So it's not just delivery, it's not just California, it's a wide range of people that are trying to get to electrification. And in our case, it's because they can just pencil the math. Here's my cost, I have some investment incentives. I'm going to reduce 50% or so of my fuel cost. I'm going to have 40% less scheduled maintenance costs. There's a lot of opportunity, and the math for cost of ownership, and many of these guys were already doing it before, moving from leased cars that were fuel -- fully fueled to hybrid leased cars because it's really good when you're idling all the time. It's a super efficient way to run your business. So charging incentive programs are really important for us and then working together on future product innovations that allow this grid resilience opportunities that we have. So key partners. With that, if we go to the next one, we're out. So our goal, serving customers better, including you guys. This always-on relationship that we have for digital, matching up vehicle productivity and health, driver productivity and health, integrate it digitally into our service networks to have anticipate engineering issues in the vehicle based on usage before it becomes a problem, order those parts before you get to the dealership. And we're going out with mobile ServiceNow, we go out to you as commercial customers and to fix it on sites there, maintenance tires, so you don't have to bring in a shop with employees really revolutionizing that business in these new kind of capabilities with electric solutions in all regions, this also goes for Europe as well for us. And we're trying to deliver on the commercial vans. So for those of you waiting for vehicles, I apologize in advance. We are doing everything we can. We are investing deeply in the supply chain, not just product procurement, but spend hours on semiconductors and deep, deep in the system, improving that whole process because there are a lot of customers waiting for vehicles. So with that, Durgesh, I think you're on.

All right, time for some tough questions now. Okay. Maybe just -- I'll start off, I guess, just on the concept of just the utility as a partner. So what could utilities just -- what's the ask from the utilities in this room? What could they do sort of better to support your and country's EV penetration goals? And where do you see the most room for improvement as far as utilities go?

For me, I think maybe there's 3 things. The first is jointly working on education of the customers. We have a lot to explain on the vehicles. You guys have a lot to explain on how to support them in a lot of other programs that you have and also dispelling some myths. Hey, is the grid going to be there? I'm sure you get the question we get all the time. "I can't get electric vehicle because I hear the grid can't support the electric process." There's sort of eliminating concerns and myths and explaining how the vehicles can work and just making it easier, how does a vehicle connect with electrification, is difficult. Most fleet managers, as I mentioned, they didn't buy kilowatts. They were buying oil. Maybe the property manager was buying kilowatts and they don't have any familiarity with the subject, especially the smaller the business. So this process of being available to collaborate and educate the customer base, here's easy steps and training materials online and collaborating with the dealer network that we have in each of the region, which is our face to the customer, is going to be key. So we'll have to do a lot of that. I think the second one would be the simplification, us and you guys together. It's really hard to get the business processes to work together on what the incentives, what's available to customers, who do I contact? Because it's new people for them, they don't really know, that's part of it. It's complicated for us to get EVSEs applications approved for, here's the charges we want to use and help our customers with, and we have a hard time understanding all the different programs. And I think there's other ones that we're working with EEI and [ Aprion ], which is more on the interconnectivity standards and some of the back end because each utility has its own story. For us to get some of the super opportunities of the future of bidirectional power and grid resilience, smart charging, it requires a lot more work. And it's -- it's hard for us for one company to interface with hundreds of utilities to get that capability across the system. And the last one I'd say would be speed of the planning and deployment. If they're going to buy their vehicles next month, they need charging on site and collectively -- this is a collectively working together, where is that going. Does the infrastructure is going to be in place so they can get the vehicles up and operating? Because if it's not, the experience is going to be bad and the business case starts to fall apart. And the fleet manager, if you're in their position, they got a job to do. But if their employees are stranded out there in the -- or panicking for those you who are panicking, oh my god, sweating, I'm not going to be able to get to the next charger, they have -- they're really worried about their job. The Board says, go electric. And guys, but if I blow it, I'm going to get flyer. So it's super personal to have that kind of support. So making sure that we have an infrastructure and charging plan in place collectively that can support them as they make a transition, then the whole process will accelerate.

Got it. So education, simplification and speeding up and planning and deployment. Maybe just on the education comment that you made, whether the grid can take it all, right, or whether the grid is going to be there. That's a question we get a lot from investors. So maybe can you just talk about just the energy consumption and impact on the grid. And are you advancing technologies to make it more efficient from an energy consumption standpoint? And just what -- where do you see the annual load impact from EV's trending?

So for us, we are tackling that a lot of different ways. So I think generally, I see about 1% impact on the grid today and going to maybe 10% by 2030. Probably one of these is all on the averages, again, right? It's like EV's in Europe. Norway is at 50%, Italy is not, and it can be fine on the averages. So there is concentrations of electrification, some guys state and programs. Either programs that are incentivizing EV's or restricting usage or benefits that are nonfinancial. And so understanding jointly where that is going in to be prepared as part of the problem, this is in the planning process. In our case, part of it was planning the vehicles. We wanted to have, as I mentioned, Level 2 capabilities and balance out those loads. We don't really want our customers from a battery standpoint or neither doing sharp hits on DC charging and jam and chemicals in or taking it from 80% to 100% at the tail end of a charge. So we're trying to optimize the equipment we put on the vehicle and the charging strategies with our customers to help them through. No, no, you don't really need that. You can manage the business this way with your operating pattern. And over time, I really think this opportunity is on the peak loading. Are we going to -- again, charging cycles using the off-peak rates with software to really make that flexible. And in the future, as we go forward, bidirectional, can we really help you guys take the load off the grid or when the renewables are available online, we can help you as we work through that. It's just a lot of mechanics currently.

Awesome. Then just shifting gears on the policy front. You mentioned the Inflation Reduction Act as being sort of a big winner. Maybe just how has that impacted your sort of growth strategy at Ford as it relates to EV's?

So I think for us on -- especially the 2 sides of it, of course, there is the demand side, and the legislation has been taking its time to come through. Glad to have it. But the lack of clarity, again, slows down customers. Generally, unclear any part of confusion, all decision-makers slow down. So in the commercial space, happily, it's much easier. $7,500, no strings and we get production credits if it's in U.S. production. So it's been quite simple, and I think it's really going to help and make it easier for those decisions. I think for a lot of us are going to turn out to be the easier implementations than the random, where is my residential base going to be? For or the retail side with the MSRP limits and where is the sourcing, et cetera, some of that is still being worked through and even the financing policy. Is it a leasing? I think the fleet management companies are trying to determine. I'm still not clear that -- are they applicable for the financial credit. So there's some confusion and elements of the business, but the good thing is there's something there, and it's there through 2032. So that allows and particularly business as I can do planning and that's what they really want, they want to do planning.

Got it. So it gets you long-term stability?