Ford Motor President and CEO Jim Farley, He returned from his last trip to China last May with palpable concern for the future of the automotive industry. What he saw in the Asian country impressed him, to the point of considering Chinese electric car manufacturers as an “existential threat” to the giants of the West.
Farley’s latest visit to China, a market where electric vehicles already account for 40% of sales, has forced him to rethink Ford’s strategy, which until now has maintained a moderate stance on electrification, like other traditional manufacturers.
Faced with high Asian competition, with brands offering high-performance cars at surprisingly low prices that most Western manufacturers cannot match at the moment, Ford’s CEO is clear: “Meeting Chinese standards will be the most important priority.” For him, “they are way ahead.”
Tesla is no longer the main threat to traditional car manufacturers
The CEO is a committed professional, always aware of the numbers and changes in the sector. During his trip to China, Jim Farley was able to see first-hand how the local automotive industry has advanced, a sector that has grown by leaps and bounds in just a few years, recovering the market share that its foreign rivals had stolen from them years before.
Brands like BYDChangan and Xiaomi are now leaders thanks to a strategic combination of lower prices, high-tech luxury interiors and fast upgrades of vehicles.
Not only are these Chinese manufacturers producing premium electric cars at prices that are incomparable to those of Western manufacturers, but they are also expanding rapidly in Europe, the Middle East and other markets. Meanwhile, the electric market is slowing down in the US.
At @AspenIdeasI explained why I wrote my op-ed about falling in love with electric vehicles. I think it’s important to talk more about the actual human experience of driving electric vehicles, instead of the politics. You can read it here: pic.twitter.com/iJl7Z3VJTr
— Jim Farley (@jimfarley98) July 2, 2024
For years, Tesla was the biggest headache for auto CEOs trying to navigate the transition to electric vehicles. But now that has changed. The nimble automaker’s rapid rise in China is shaking up executives from Detroit to Germany to Japan.
Even Tesla’s own CEO, the ever-controversial Elon Musk recently acknowledged that Chinese car manufacturers “are the most competitive” in the world.
A clear example is the Xiaomi SU7: an electric SUV that in its entry-level version has 295 hp and a 73.6 kWh battery for a range of up to 700 km, which costs between 27,000 and 36,000 euros and offers systems such as connecting to the home to turn on the air conditioning or lights when the owner arrives.
These types of vehicles not only surpass models like the Ford Mustang Mach-E or the Tesla Model 3 in terms of technology, but also more luxurious models like the Porsche Taycan, which is much more expensive and has fewer features.
But Farley was not only impressed by the technological advances, but also by the ability of Chinese manufacturers to reduce costs without sacrificing quality. During his visit Ford CEO tested Changan electric SUVa former Ford partner. After the test, the conclusion was clear: “These guys have a head start on us,” Farley told John Lawler.
“This is an existential threat,” Farley told his Ford board colleague, noting that Chinese manufacturers are using advanced technologies such as artificial intelligence to deliver a product far superior to what the U.S. industry can currently produce.
Strategic change at Ford with its electric cars
After his experience in China, Farley decided to send Chinese electric vehicles to Ford headquarters in Dearborn for the company’s engineers to dismantle them and analyze how Asian competitors had achieved those results. This internal analysis was part of an emergency strategy so that Ford could catch up in the race for electrification.
The shift in focus is inevitable: Ford is now rethinking its future electric models, prioritizing smaller, more affordable vehicles that can compete with the low prices of Chinese manufacturers.
In fact, Farley has recently announced the cancellation of future electric SUVs due to the high cost of batteries and the inability to compete on price. The company is working on a new low-cost platform to launch competitive electric vehicles, such as a medium-sized pickup truck by 2027.
Doug Field, a former Tesla executive and now head of Ford’s technology transformation, explained that Farley is putting pressure on the team to act quickly. and adapt to current conditions. “He can make us feel uncomfortable, or we can wait, and the Chinese will make us feel uncomfortable,” Field said, stressing the urgency of the situation.
The future of the global automotive industry, with China at the forefront
What Jim Farley experienced on his latest trip to China is just one reflection of how the Asian giant has become an undisputed leader in the electric car industry in recent years.
Chinese manufacturers are not only dominating their local market, but are also rapidly expanding into international markets, such as Europe and Latin America, where they offer affordable, high-tech electric vehicles.
The case of Mexico is a clear example: Chinese brands now account for 20% of electric vehicle sales in the countryand because of the NAFTA free trade agreement, these vehicles avoid the high tariffs imposed on cars imported directly from China. This international expansion is not only putting pressure on manufacturers like Ford, but is also changing the global dynamics of the automotive market.
Traditional manufacturers in the West, which until now focused on the gradual transition to electric vehiclesare facing a radically different landscape. Now, there is a constellation of Chinese brands that are years ahead in technology, design and production costs, which puts the auto giants in a difficult position.
The global automotive industry is arguably at a tipping point, with China positioning itself as the leader in the race to electrification. Ford and other traditional companies will have to adapt quickly or risk losing significant market share, while Chinese manufacturers continue to advance with unbeatable speed and efficiency.
Source: www.motorpasion.com
