Chinese Automakers Are Far Ahead Of Ford And GM On Cost And Quality

Image Source: PexelsFord’s (F) CEO, Jim Farley, is very scared of Chinese automakers. He should be. The US trails badly.An ‘Existential Threat’?!Jim Farley labels China’s electric carmakers ‘existential threat’.That’s a term we hear about climate change and nuclear war. But cars?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 AdvantageFord 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.Team US (Biden, Harris, Trump) all insist on US parts and US labor. Great. This forces US buyers to pay $20,000 more for less features.
China Produces 55 Percent of All Steel, Biden and Trump Eye TariffsOn May 5, I noted China Produces 55 Percent of All Steel, Biden and Trump Eye Tariffs

China produces nearly 80% more than the next nine biggest steel producers, which are, in order, India, Japan, the US, Russia, South Korea, Turkey, Germany, Brazil and Iran.

Hey, let’s drive up steel costs too. Why not.
Ford Loses $132,000 on Each EV ProducedOn April 26, I reported Ford Loses $132,000 on Each EV Produced, Good News, EV Sales Down 20 Percent

Ford (F) reports a huge loss on every EV. Sales are down 20 percent holding the losses to $1.3 billion.

BYD Unveils the “Shark” a Plug-in Hybrid Pickup Truck Built in MexicoOn May 14, I noted BYD Unveils the “Shark” a Plug-in Hybrid Pickup Truck Built in Mexico

The Chinese automaker BYD (Build Your Dreams) announces a 700-mile range PHEV that will be built in Mexico, this year.

Hey, let’s ban those too. So China will sell cars and Trucks in Mexico. Because of tariffs, the US won’t.
Another Green Energy Company Declares BankruptcyConflicting goals often leads to the worst of both outcomes. That’s what’s happening with solar panels and EVs.For example, please note Another Green Energy Company Declares Bankruptcy, Thank Biden’s Tariffs
Tariffs and Subsidies BackfireBiden only wants clean energy if it every piece of it is made in the USA. That means higher costs, even with subsidies.I commented on this in advance as it was easy to see.The attempt to force production of solar panels in the US resulted in prices so high that few wanted them.
Three Results

The goal now appears to be to put so many restrictions and tariffs on everything without the necessary infrastructure. This makes EVs, solar panels, etc., too damn expensive for the masses to buy.
How’s the EU Doing?Good question. Please note Volkswagen’s Choice: Fire Union Workers and Cut Costs, or Go BankruptEveryone in Germany is angry over closures and the firing of union workers.
Bottom Line – More InflationHere is the bottom line result in case you haven’t figured it out. 370,000 UAW members gain. Biden cheers. The 52 million people buying cars in the US overpay.Yet, despite all the rules, regulations, mandates, monetary printing, and free money handouts, economists cannot figure out why people are angry.I recall a bumper sticker decades ago: Hungry, Eat Your Foreign Car.If only we could.Meanwhile, Ford’s CEO want to compete with BYD by cutting $800 off a $45,000 car that is $20,000 overpriced.More By This Author:Understanding The Fed’s Dual Mandate, Should The Fed Cut Rates?
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