Diane M. Kimura

The Wall Street Journal reports What Scared Ford’s CEO in China

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 aggressively expanding to overseas markets.

"John, this is an existential threat,” Farley said.

In the span of a few years, Chinese EV maker BYD, backed by Warren Buffett, and other domestic brands have clawed away gobs of market share in China from once-dominant foreign rivals, through a combination of lower prices, high-tech interiors and rapid vehicle updates. Today, they are quickly expanding in Europe, the Middle East and other Asian markets.

Shortly after the trip, Farley arranged to have Chinese EVs shipped to Michigan for executives and directors to check out and sit in. The models were displayed in a Ford conference center near its headquarters. During board-meeting coffee breaks, directors took turns fiddling with cars.

One was the first EV from smartphone giant Xiaomi, which has drawn comparisons to a Porsche and sells for $30,000 to $40,000, below Ford’s similarly sized Mustang Mach-E SUV. The Xiaomi has a fragrance diffuser and an infotainment system that can connect to devices inside the home when the car approaches—turning on the home lights or air conditioner, for example.

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.

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.

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.

"Jim, this is nothing like before,” Lawler told Farley after the drive. "These guys are ahead of us.”

Ford’s Response is Amusing:

Farley and Field huddled around a laptop, looking at a spreadsheet of line items for the future midsize electric pickup. The goal: figure out how to extract $800 in cost.

The team had overachieved on the driving range by 16 miles, Field explained, which meant they could wring out about $500 by shrinking the battery. Finding the rest of the savings would be a slog. Would it really need a heated steering wheel? Maybe the front trunk was expendable, one of the execs suggested.

Before long, Farley worried aloud that they might be cutting too many corners, and that "the product could end up being really sh—y.” He suggested to Field an informal process: How about they slap sticky notes all over the prototype to hash out what should go?

China’s Advantage:

Ford is MickeyMousing around with trying to cut $800 here and $500 there when Ford vehicles cost $20,000 too much.
Biden’s response is to up tariffs on Chinese cars by 100 percent.

China has an advantage in labor costs and mineral costs to make batteries.

Tim adds:

I'm not at all worried. There really isn't much consumer demand for the expensive EV's, which are mainly sacraments of the self-loathing guilt-ridden West and China may be "pulling away" with the technology but how many Chinese are actually driving these things? China and Russia both understood that the WEst could waste it's time and energy and wealth chasing after a will-o-the-wisp, the whole Green technology thing.

China knows that as long as they can get foreign companies chasing these things they can profit by their control of rare-earth elements and the like. Oh, and they are willing to pollute their own environment in the making of the batteries needed.

Ford worrying about this is like worrying about steam engines or hydrogen; yes, others may be ahead of them in those regards but so what? In the end the hydrocarbon economy is going to continue to prosper while the "Green" economy will falter.

It is a fact that Russia promoted green tech and that to get the West to end it's own oil and gas industry so Russia would become sole provider. It largely worked too.

Electric vehicles require the production of electricity and the loss of energy by transmitting that power. It is a net loser, unlike hydrocarbons which are found and not made. We have to actually MAKE electricity, then transmit it, then store it. We lose energy at each step. Gasoline has to be refined, but it has energy in it already and once refines is ready to go.

This is like Edison going into the kerosene light business because of the prospects of the Aladdin Light Corporation making a good competitor for his light bulb, or for Boeing making airships. There isn't any crying need.

The EV "craze" is artificial, promoted by governments to meet the Paris Accord and other green agreements to cut emissions (completely ignoring the emissions required to make the electricity to charge the silly things.) This would be technology for golf carts and Six Flags rides otherwise.

I agree; price is a huge part of the problem. Of course Ford just signed a contract with UAW that gave a massive raise and all sorts of new benefits to the labor union. How do you compete with Chinese labor being payed a couple of bucks an hour and who are under the discipline of the Communist Party?

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