Electrical automobile batteries are in brief provide, and prices for supplies corresponding to nickel and cobalt are surging. But legacy automaker Ford Motor says it plans to be profitably constructing thousands and thousands of EVs a 12 months in simply 4 years.

This week, the Detroit automaker gave buyers slightly extra readability about the way it plans to succeed in that aim and remodel its enterprise constructed on gas-guzzling automobiles.

As electrical automobiles account for a rising share of the worldwide automotive market, Ford in March introduced it could reorganize its enterprise and separate its internal-combustion engine and electrical automobile efforts. By 2026, it mentioned it expects to construct greater than 2 million electrical automobiles yearly — a couple of third of its complete international manufacturing — whereas increasing its working revenue margin.

Wall Road analysts have been typically constructive concerning the plan, however some expressed skepticism concerning the lack of specifics round how the corporate plans to beat the provision challenges out there. Morgan Stanley’s Adam Jonas known as it a “stretch” aim and mentioned he lacked confidence in Ford’s capacity to safe sufficient uncooked supplies and tooling to fabricate batteries to even come near its projection.

Ford addressed a few of these considerations in one other presentation on July 21, when it advised buyers that it has secured sufficient batteries to get to its near-term goal: 600,000 EVs per 12 months by the top of 2023. As of now, it mentioned, it has secured about 70% of what it must hit its 2026 aim.

Ford promised to share extra about the way it plans to hit its objectives throughout its annual capital markets day subsequent 12 months. However throughout its second-quarter earnings name final week, CEO Jim Farley gave some extra hints concerning the automaker’s technique.

As a substitute of simply swapping out internal-combustion engines for batteries and electrical motors, Farley has mentioned the corporate is totally rethinking the way it develops its automobiles — and the way it retains them recent over time.

The corporate sees a brand new period the place will probably be in a position to freshen its electrical automobiles with upgrades to software program, batteries and electrical motors, a lot as Tesla does. Which means the costliest elements of a automobile — ‌‍‎‏the sheet metallic physique panels and the underpinnings that type its general proportions — will not should be modified as incessantly.

“We’ve a chance as we go digital with these EVs, to simplify our physique engineering and put the engineering the place prospects actually care,” Farley mentioned final week. “And it isn’t a special fender. It is software program. It is a digital show expertise. It is a self-driving system and the [autonomous vehicle] tech. And naturally it should be, in some circumstances, extra highly effective motors.”

Ford usually redesigns its conventional automobile fashions each 5 to seven years. If it may well prolong that point by counting on software program updates to maintain its automobiles recent, relatively than physique redesigns, it may save fortunes.

It is a part of how Ford expects to enhance its working margin to 10% by 2026. For its second quarter, the corporate posted a 9.3% adjusted working margin. These outcomes have been helped by tight new-vehicle inventories which have allowed Ford to spice up its costs.

Ford is at an obstacle to corporations like Tesla and EV startups that promote on to customers, with out sellers performing as middlemen.

The corporate is not planning to eradicate its franchised sellers, which get pleasure from robust authorized protections in lots of U.S. states that successfully forbid Ford from promoting on to its prospects as Tesla does. However Farley mentioned that Ford sees a path to lowering that price drawback — which he estimates at round $2,000 per automobile — by conserving sellers’ inventories very low and by shifting the way in which Ford markets its merchandise.

One key to that effort: Ford plans to let prospects order its EVs on-line relatively than shopping for a automobile from a seller’s stock.

As Farley sees it, sellers could have only some new automobiles on their heaps, simply sufficient to supply check drives to prospects earlier than they order. Clients will have the ability to order from the dealership or on-line “of their bunny slippers,” Farley mentioned, with the seller making the supply and offering service after the sale.

Farley estimates that the low seller inventories and on-line ordering will make up roughly $1,200 to $1,300 of that $2,000 per-vehicle price drawback, whereas guaranteeing that Ford’s sellers stay worthwhile. The plan will free sellers from having to hold pricey inventories, permitting them — in concept, a minimum of — to focus extra on service and buyer schooling. That might give Ford an edge that EV makers promoting direct will not have the ability to simply match.

“I feel that is a special play than the pure EV corporations,” Farley mentioned.