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Jim, this is nothing like before. These guys are ahead of us.

Summary:
These guys are ahead of us. What Scared Ford’s CEO in China, WSJ Jim Farley had just returned from China. What the Ford Motor chief executive found during the May visit made him anxious: The local automakers were pulling away in the electric-vehicle race.  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

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These guys are ahead of us.

What Scared Ford’s CEO in China, WSJ

Farley . . .

Jim, this is nothing like before. These guys are ahead of us.

Humbling trips

Chinese brands have so far been kept out of the U.S. by steep tariffs, geopolitical tensions and regulatory hurdles. But some have established a toehold in Mexico, where China-built vehicles—both EVs and combustion-engine vehicles—now account for about 20% of sales. 

Governments around the world are worried about China’s EV expansion, citing everything from potential job losses to data-security concerns. In the European Union, where Chinese imports make up about one-fifth of electric sales, regulators recently disclosed plans for tariffs up to nearly 50%. The Biden administration went further with a roughly 100% tariff.  

Farley, a 62-year-old, blunt-talking car fanatic who spent the early part of his career in marketing at  Toyota Motor, sees Chinese EVs as an immediate threat in Europe and other overseas markets, and a long-term risk in Ford’s profit engine of North America, regardless of protectionist measures. 

Jim, this is nothing like before. These guys are ahead of us.

Farley often reminds his executive team of how Toyota and other Japanese car companies grabbed market share from the U.S. automakers in the 1980s and 1990s, followed in recent decades by Korea’s Hyundai and Kia, which have found success with EVs. 

“I’ve seen this movie before,” said Farley, who has been Ford’s CEO for four years.

A few humbling trips to China in the past 18 months prompted Farley to alter his EV strategy. 

On a visit to China last year, he watched engineers dissect an electric car from Chinese juggernaut BYD to reveal elegant, low-cost engineering. A spin around a test track in another China-branded EV left him blown away by the car’s ride quality and high-tech features. 

Those experiences persuaded Farley to narrow Ford’s focus in China to commercial vehicles, rather than trying to compete with local manufacturers in its consumer market. Now, he is racing to fend off the threat of Chinese EVs elsewhere—in part by borrowing from them.    

‘These guys are ahead’

For decades, Ford and other global carmakers did not view Chinese automakers as much of a threat.    

China opened its auto market to foreign companies in the 1980s under the condition that they enter joint ventures with fledgling state-owned carmakers. The local manufacturers mostly played little-sibling roles to their foreign JV partners, helping them to navigate red tape and providing some capital to build factories.

Meanwhile, Beijing was methodically investing in a plan to leapfrog global carmakers through a move to electric cars. The government offered generous subsidies for car companies to build EVs, and for consumers to buy them. Huge investment into car chargers also nurtured the EV market.

By early this decade, those once-shaky Chinese companies—joined by a few hundred startups—had begun churning out stylish, affordable EVs. BYD in particular pulled away from the pack, selling more than three million electric and plug-in-hybrid cars last year, nearly seven times higher than in 2019.

BYD’s cheapest EV, the Seagull, starts around $10,000 and features a fashionable cabin; a rotating, iPad-like touch screen; and more than 300 miles of driving range, comparable to EVs from legacy automakers that are priced three times higher. It is currently for sale in China and Latin America and BYD plans to start selling it in Europe next year for around $20,000. 

In early 2023, Farley made his first trip to China since it reopened after years of pandemic restrictions. He sat in the driver seat of an electric SUV from Ford’s longtime joint-venture partner, Changan Automobile, which for years had been a middling player in China, its market share hovering around 5%.

Farley, who races vintage cars and has an encyclopedic knowledge of car models, thrashed the EV around Changan’s sprawling test track in central China, as Ford Chief Financial Officer John Lawler rode shotgun. Afterward the executives sat silently, stunned at the progress Changan had made. The ride was smooth and quiet and the cabin upscale, with easy-to-use technology. Lawler told Farley after the drive.

“Jim, this is nothing like before.

These guys are ahead of us.”

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