Hybrid and electric car sales right now are weak. That's not surprising, given that the price of a gallon of gasoline is averaging under $2 a gallon in 41 states.
So why is Ford upping the ante on electrification?
The automaker announced it will invest $4.5 billion in hybrid and electric car programs in the next five years.
Analyst Rebecca Lindland of Kelley Blue Book says the investment by Ford, and similar investments by other car companies, is driven by a looming zero-emission mandate in California and eight other states.
Beginning in 2018, 4.5% of vehicles offered for sale in California and those other states must have zero CO2 emissions. The percentage increases every year until 2025, when 22% of vehicles must have zero CO2 emissions.
Lindland says the risk for automakers is that consumers may not want to buy the cars, especially if gas prices remain low.
"Unfortunately, saving the environment is not the same as saving your balance sheet," Lindland notes wryly.
She says the mandate was drafted at a time when gasoline was $4 a gallon, making the case for owning a more expensive hybrid or electric vehicle an easier one.
Ford CEO Mark Fields, however, says the investment is driven first and foremost by customer needs, and secondarily by regulations.