Ford CEO Jim Farley is concerned about competition from Chinese electric car makers. The biggest threat is BYD, backed by Warren Buffett’s Berkshire Hathaway. The company also owns the entire supply chain for the batteries, which account for about 40% of the price of a new EV, allowing it to produce vehicles at significantly lower costs than industry standards.
This kind of advantage is hard to beat, and Ford is evaluating its battery strategy. Farley on Thursday shared his thoughts on how to deal with the challenge from China, suggesting there could be cooperation between the rivals on battery production.
“We have a competitive battery situation,” Farley told attendees at a Wolf Research automotive conference in New York on Thursday, Reuters reported. “Using common cylindrical cells can have a huge impact on our purchasing ability. Maybe we should.” [this] with another OEM [automaker]”
He may be able to find a willing partner among his rivals — after all, he’s not the only automaker president concerned about BYD’s price advantage.
“Nothing can match BYD on price. Times have changed,” said Michael Dunn, CEO of Asia-focused auto consultancy firm Dunn Insights. financial times last month. “Boards in the United States, Europe, South Korea and Japan are in a state of shock.”
Earlier this month, Farley told investors that Ford “made a quiet bet two years ago” on a secret “Skunk Works” team dedicated to developing a low-cost EV platform.
“It was a small group, a small team, made up of the best EV engineers in the world, and it was separate from the Ford mothership,” he said. It was a startup. ”
The Irvine, Calif.-based team is led by EV engineer Alan Clark, who spent more than a dozen years at Tesla before Ford hired him in 2022 as executive director of advanced EV development. Members include engineers from Los Angeles-based Automotive Power (AMP), an energy management venture that Ford acquired last year.
There has never been any question as to who Farley sees as the main competitive threat in the EV space. “I think we look at China as our main competitor, not GM or Toyota,” he said, speaking at a Morgan Stanley event last May. China will become a powerful country. ”
China’s EVs are ‘truly disruptive’
Ford is scaling back its EV production plans and focusing more on hybrid models amid weaker-than-expected demand, but remains committed to its long-term EV strategy.
Chinese EV makers have been accused by EU regulators and others of profiting unfairly from government subsidies and are rapidly expanding in Europe, Southeast Asia and other markets around the world. So far, high tariffs have prevented exports to the United States, but U.S. lawmakers are worried that the North American Free Trade Agreement will be used as a back door to factories in Mexico.
Ford, which operates in well over 100 countries, is watching the Chinese EV maker’s international expansion carefully.
“If we can’t compete fairly with Chinese people around the world, we’re putting 20% to 30% of our revenue at risk over the next few years,” Farley said Thursday.
He added: “Last year, 25% of all vehicles sold in Mexico were sourced in China. The world is changing.”
Farley pointed out that BYD can produce a small EV model, the Seagull, for materials costing between $9,000 and $11,000. The Seagull has quickly become one of BYD’s top sellers in China since its debut last year, but it’s overseas where it “could truly become a disruptive force,” writes market research firm AutoVista Group.
Tesla is also eyeing BYD and other Chinese automakers, which recently overtook Tesla in global EV sales.
Chief Executive Officer Elon Musk told investors last month that “unless trade barriers are established, most car companies in the world will go out of business.” they are very good. ”
Tesla plans to start producing entry-level EVs starting at $25,000 next year, hoping to better compete with Chinese rivals and cheaper gas-powered cars.
Farley said he has directed engineers to develop affordable EVs. “We have to make money in the first 12 months. If we can’t make money, we won’t launch the car.”