Ford's Farley: 'We see the Chinese as the main competitor, not GM or Toyota'
Published in Business News
Ford Motor Co. CEO Jim Farley is looking further afield than the Dearborn, Michigan, automaker's traditional rivals as the company charts a future defined by electric, digitally-connected vehicles: namely, to China.
"We see the Chinese as the main competitor, not GM or Toyota," said Farley, speaking at a Morgan Stanley conference Thursday. The comment came in response to a question about how Ford can preserve its current strategy of focusing on the segments where it's most successful, in the context of an increasingly competitive landscape and as Chinese automakers make significant gains.
"As far as the Chinese (are) concerned, it's going to be really humbling. They produce 70% of the electric vehicles in the world in China," Farley said. "The Chinese are going to be the powerhouse, we think. To beat them, you either have to have a very distinct brand — which we think we do, by leaning into our icons — or you have to beat them on cost. But how do you beat them on cost if their scale is five times yours?"
Farley pointed to Chinese competitors like SAIC Motor, Great Wall Motor and Geely — but the one he's watching the closest is BYD Auto, the company that this year ascended to China's top-selling auto brand and which is vying with Tesla Inc. for the title of the world's biggest electric-vehicle maker. Farley noted BYD's massive scale, investments in lithium iron phosphate battery chemistry and its high levels of vertical integration.
"I like BYD. Totally vertically-integrated, aggressive, unapologetic," he said. "Very, very impressive company."
With China now holding the title of the world's largest auto exporter and as the country maintains dominance over EV battery technology, Farley said the United States has a decision to make, even amid high geopolitical tensions: "If localizing their (battery) technology in the U.S. gets caught up in politics, the customer's really going to get screwed. So we have to work through that in this country."
Detroit's automakers have been reassessing their strategies in China amid rapidly increasing competition from domestic manufacturers there that are leading the way on electrification and offering high-quality, affordably-priced EVs. The stakes are high, as China is not only the world's largest auto market, but the top EV market in the world.
Ford, which has a market share of about 2% in China, recently said it was moving to a "leaner" model there, including a focus on exports and on areas of strength such as commercial vehicles. And while rival General Motors Co. has a larger business there, executives there have also acknowledged challenges amid years-long sales declines. Stellantis NV is opting for an "asset-light" approach in China.
"We're not going to try to serve everyone," Farley said earlier this month. "It'll be a lower investment, leaner, much more focused business in China, and we're going to have a team on the ground that will be global resources for the company, because of how important the market is in EV." That reassessment also includes reported job cuts.
The market fluctuations in a country once dominated by foreign auto brands can be explained in large part by Chinese consumers' rapid adoption of electric vehicles. More than a quarter of passenger vehicles sales in China were electric last year, and the vast majority of those EVs were produced by domestic manufacturers.
Farley's comments Thursday about the competitive cost structure Chinese automakers are establishing echoed similar remarks Stellantis CEO Carlos Tavares made recently.
"Now we have the problem of affordability, and we have our Chinese competitors that are going to challenge us with a very different cost structure," Tavares said. "We are challenged by our Chinese competitors. They have done the job. So, the question for Europe is very important: Is the only way to compete with our Chinese competitors to use the same cost structure, or can we find another way to compete with them? That is the 1 million euro question."
Meanwhile, Ford recently has been embroiled in political backlash over its planned use of Chinese technology at a forthcoming $3.5 billion battery plant in Marshall.
Ford is establishing the first automaker-backed LFP battery plant in the United States. The operation is slated to open in 2026 and to create about 2,500 jobs.
Ford will own the property, employ the workforce and operate the plant. It will license battery technology from China-based Contemporary Amperex Technology Co. Ltd., or CATL, an arrangement that does not involve a joint venture or cross shareholdings but which nonetheless has drawn intense criticism from Republican lawmakers. Ford officials have pointed out that many EV batteries are imported from China, and that CATL will not receive U.S. tax dollars for the Marshall plant.
Ford's stock was trading up less than 1% to $11.42 per share Thursday afternoon.
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