Ford CEO says taking apart Tesla, Chinese EVs was ‘shocking’ — forcing him to overhaul company
News Summary
Ford CEO Jim Farley stated that dismantling the Tesla Model 3 and Chinese electric vehicles was a "humbling" experience, revealing "shocking" differences that forced Ford to completely rethink its car manufacturing. For instance, the Mustang Mach-E's wiring loom was 1.6 kilometers longer than Tesla's, adding 70 pounds and an extra $200 in battery cost. This realization led Ford to split its company in 2022 into Model E, focused on EVs, and its traditional Blue and Pro businesses. Despite Model E losing over $5 billion in 2024 and facing similar losses this year, Farley expressed no regret, viewing it as essential. Ford currently ranks third in US EV sales, behind Tesla and Chevrolet, with the gap to Chinese competitors widening. Farley has warned that American EV makers are lagging behind their Chinese counterparts, who now account for over half of global EV sales and are rapidly expanding in Europe, Asia, and South America. Chinese-made EVs are not available in the US due to punishing 100% tariffs. Farley himself notably drove a Xiaomi SU7, praising Xiaomi as an "industry juggernaut" and "the Apple of China."
Background
Ford Motor Company, one of America's legacy automakers, is actively transitioning towards electric vehicles. In 2022, Ford announced a reorganization of its business into three distinct units: Ford Blue (internal combustion engine vehicles), Ford Model E (EVs and digital services), and Ford Pro (commercial vehicles and services). This restructuring aimed to accelerate EV development and enhance transparency. Currently, the global EV market is highly competitive, with Chinese EV manufacturers rapidly gaining market share worldwide due to cost advantages and technological innovation. The previous Trump administration imposed tariffs on Chinese goods, and the incumbent Trump administration has maintained and potentially escalated a 100% tariff on Chinese EVs, effectively blocking their entry into the US market to protect domestic industries.
In-Depth AI Insights
What are the true motivations behind Ford's EV business split, beyond merely catching up technologically? Ford's decision to separate its Model E business, while ostensibly aimed at accelerating EV R&D and improving efficiency, likely has deeper strategic motives, potentially laying the groundwork for a future spin-off or joint venture. - By independently accounting for and disclosing Model E's substantial losses (over $5 billion in 2024), Ford might be signaling to the market and investors that its traditional businesses are subsidizing the nascent EV unit, thereby buying more strategic maneuverability. - This transparency regarding losses could also be a prelude to attracting external strategic investors or even listing Model E as a separate entity, easing the financial burden on the parent company during its transition and potentially avoiding valuation drag from legacy operations. What are the long-term implications of China's EV cost and technological advantages for the global automotive industry landscape? China's rise in EVs is not just a price war but a result of systemic supply chain advantages and significant state strategic investment, which will fundamentally reshape the global automotive supply chain and competitive landscape. - China's accumulated expertise in battery technology, smart cockpits, software integration, and production efficiency allows its EVs to offer advanced features at lower costs. This forces Western legacy automakers not only to catch up technologically but also to pursue disruptive innovation across their entire manufacturing and supply chain management. - In the long run, if Western automakers fail to compete on cost and technology with China, it could lead to a sustained erosion of their global market share and potentially trigger further escalation of trade protectionism, thereby exacerbating the fragmentation of the global automotive industry. Is the US 100% tariff on Chinese EVs a short-term protectionist measure or a long-term strategic play? What are its potential economic and geopolitical implications? The US implementation of a 100% tariff on Chinese EVs is, in the short term, aimed at protecting domestic jobs and the local auto industry. However, its long-term implications are likely more complex, involving both economic and geopolitical considerations. - Economically, while high tariffs prevent cheaper Chinese EVs from entering the US market, they may also limit consumer choice, slow down EV adoption in the US, and potentially accelerate Chinese companies' expansion into other regions (e.g., Europe, Latin America), forming new global competitive dynamics. - Geopolitically, this move is a continuation of the Trump administration's "America First" strategy, designed to curb China's competitiveness in high-tech sectors and force global supply chain restructuring. However, it could also lead to a fragmentation of the global trading system and intensify tensions between major economies, challenging the process of globalization.