The rapid rise of Chinese electric vehicles (EVs) is causing waves in the global automotive market, and legacy carmakers like Ford are feeling the pressure. With the Ford Mustang Mach-E having launched in New Zealand last year, the competition from Chinese EVs is becoming a growing concern for established brands.
Chinese EV manufacturers have quickly become dominant players, not just in Asia, but in an increasing number of western markets, including New Zealand. This surge is beginning to worry established carmakers, particularly Ford, which is grappling with the competitive threat posed by these new entrants.
A recent report by The Wall Street Journal highlights a series of fact-finding trips to China made by Ford’s CEO, Jim Farley, along with other key executives, including CFO John Lawler. These trips provided Ford’s leadership with firsthand insights into the advancements made by Chinese EV makers.
In an early-morning call with fellow board member John Thornton, an exasperated Farley unloaded.
The Chinese carmakers are moving at light speed, he told Thornton, a former Goldman Sachs executive who spent years as a senior banker in China. They are using artificial intelligence and other tech in cars that is unlike anything available in the U.S. These Chinese EV makers are using a low-cost supply base to undercut the competition on price, offering slick digital features and aggressively expanding to overseas markets.
“John, this is an existential threat,” Farley said. (Source insideevs)
During his visits, Farley test-drove several Chinese EVs, including a Changan, and witnessed a mechanical teardown of a BYD vehicle, which showcased “elegant, low-cost engineering,” according to the report. This experience left Farley “anxious” and “exasperated” by the progress he saw.
ALSO READ: Ford Reveals Mustang GTD with 815 HP and 202 MPH Top Speed
“Jim, this is nothing like before. These guys are ahead of us,” Lawler reportedly told Farley after their Changan test drive. The threat posed by Chinese EVs is so significant that Farley has described it as an “existential threat” in conversations with Ford board members.
In response to the rising competition, Ford has started making strategic moves to stay competitive. Farley had two Chinese EVs, a Xiaomi and a Li Auto, shipped to Ford’s headquarters in Michigan for further testing by his colleagues. This is part of a broader strategy to understand and counter the threat posed by Chinese EVs.
Farley has been vocal about the competitive edge of Chinese EV makers, particularly their pricing advantage. “We see the Chinese as the main competitor, not GM or Toyota. The Chinese are going to be the powerhouse,” Farley told Automotive News Europe last year.
Ford currently offers a range of electric vehicles, including the Mustang Mach-E SUV and electric Transit vans in New Zealand. Internationally, Ford sells electric models like the Capri, Explorer, Puma, and F-150 Lightning.
To bolster its EV lineup, Ford is developing new small electric cars in partnership with Chinese battery manufacturer CATL. Farley emphasized the need for smaller, more affordable EVs to achieve volume sales. “We clearly see China and Tesla as the cost benchmark,” he said.
While Chinese EVs have been successful in New Zealand for years, they have yet to make significant inroads into the U.S. market. This challenge could be exacerbated if former President Donald Trump wins the upcoming election and enacts higher tariffs on Chinese-made vehicles.
Although these tariffs could offer some protection for Ford in the U.S., the company aims to remain competitive on a global scale. Farley is already implementing several strategic initiatives to compete directly with Chinese carmakers.
In July, Farley outlined Ford’s strategy to counter Chinese rivals by developing new small electric cars and lowering costs for its next generation of EVs. “The math is completely different than ICE [internal combustion engine vehicles]. In ICE, the bigger the vehicle, the higher the margin. But it’s essentially the opposite for EVs,” he explained.
ALSO READ: BYD Set to Surpass Tesla as World’s Largest EV Maker with Affordable EVs for the Masses
The rise of Chinese car manufacturers has been dramatic. Once dismissed as imitators, they have now significantly improved their engineering capabilities and are leveraging cheap labor and access to materials to become formidable competitors.
Governments worldwide are recognizing the competitive threat posed by Chinese EVs and are implementing tariffs on EVs built in China. Recently, the Biden administration imposed a 100% duty on Chinese EVs, effective from September 27. Similarly, the European Union is considering higher tariffs on Chinese EVs, with proposed duties ranging from 17% to 36.3%.
Ford’s CEO, Jim Farley, is acutely aware of the competitive threat posed by Chinese EVs. The company’s response involves strategic partnerships, developing new affordable EVs, and understanding the competition through hands-on research.
