The presence of Chinese companies in the automotive industry of the European Union is continually increasing. Following a trip to China in 2024, Jim Farley, the CEO of Ford, has publicly expressed his concern regarding Chinese vehicle manufacturers such as BYD, Xiaomi, and Changan. He emphasizes that this issue extends beyond the quality or affordability of their automotive products, but rather pertains to the speed at which they are capable of innovating.
This is why Ford has proposed a restructuring of its production strategy, focusing on smaller, more accessible electric vehicles that meet market needs. This new platform will be led by former Tesla engineer Alan Clark. Despite acknowledging the challenges of matching China in large-scale production, they will do everything possible to continue competing on equal terms.
Ford
Founded by the world-renowned Henry Ford in 1913, the Ford Motor Company first emerged in Detroit, Michigan, United States. It is an automobile manufacturing company whose headquarters are now located in Dearborn. Although it began its journey in the United States, it has successfully expanded globally, becoming recognized for producing automobiles, commercial vehicles, and racing cars. While Ford had previously invested in electric vehicles between 1998 and 2002 (without much success), it was not until 2024 that they revisited this concept. It was then that mass production of the Ford Explorer, a fully electric vehicle, commenced, and it is now available in the market.
Research on the Chinese market
Although Ford is of American origin, a significant portion of its market is located in Europe. It is precisely there that vehicle manufacturing companies face increasing competition from Chinese manufacturers. The President and CEO of Ford, Jim Farley, has come to regard companies from the Asian giant as an ‘existential threat’ to the rest of the manufacturers. To substantiate his theory, in 2024 he traveled to China with the aim of closely studying the competition.
Once there, he was completely fascinated by the speed at which these companies have been able to develop, incorporate, and market new innovation techniques. He highlighted companies such as Xiaomi, BYD, and Changan, stating, “What really keeps me awake at night is the speed at which the Chinese are innovating. Everyone talks about how good or cheap they are, but what truly stands out is how fast they are”.
What makes China´s production different?
In case the visit to the competition did not shed enough light, Ford has gone a step further. In its quest to understand and compete with BYD, the North American brand has disassembled one of the Chinese electric vehicles to analyze it piece by piece. What makes Chinese production different? Farley emphasized the cost reduction of lithium iron phosphate (LFP) batteries and their vertical integration. This allows them to reduce costs by manufacturing their own batteries, without compromising on quality.
On the other hand, although Farley explained that BYD’s propulsion systems are not the most powerful, the market strategy they have employed certainly is. It is evident that they need to optimize their own manufacturing processes if they intend to compete with such companies. “We need smaller plants, less labor, and to reduce complexity,” he stated.
What is next for Ford?
Ford’s response to this situation has been a restructuring of its own production processes, and the announcement of the launch in the coming years of a low-cost, smaller, and more accessible electric vehicle. However, its main concern remains the same: ‘What really worries me is how we are going to execute these technologies on a large scale.’ It is not so much whether our technology will be competitive, but whether we will be able to produce on a large scale with these new suppliers.’ This new platform will be led by former Tesla engineer Alan Clarke, with the expectation of narrowing the gap with Chinese manufacturers. Will Ford achieve its goal?