Ford and GM ready to work with China
The CEOs of American automakers Ford and General Motors have stated that they are considering partnerships to reduce costs related to electric vehicle technology, as Chinese competitors are expanding into the American and European markets.
Ford CEO Jim Farley mentioned the possibility of collaboration with other automakers to reduce battery costs during a separate presentation at the same conference. Chinese company BYD is planning to open a factory in Mexico, and American automakers are struggling to compete with the prices offered by Chinese companies. Farley warned that if they cannot compete fairly with the Chinese globally, a significant portion of their revenue could be at risk in the coming years.
Ford expects to incur losses of between 5 and 5.5 billion dollars on their electric vehicles this year. The company has set up a dedicated team, separate from their main engineering operations, to design a small and affordable electric vehicle that could compete with BYD’s Seagull model. Ford is also reevaluating its battery strategy.
BYD is able to produce their small Seagull electric vehicle for $9,000 to $11,000 in materials, according to Farley. An analyst estimates that Chinese production costs are 30% lower than those of Western automakers. Farley has instructed Ford engineers to develop a new affordable electric vehicle that must be profitable within the first 12 months of production.
General Motors’ CEO Mary Barra stated that GM is well positioned to start reaching profitability on their North American electric vehicles in the second half of this year, provided they can achieve an annual production rate of 200,000 to 300,000 vehicles. In China, GM’s brands will focus on premium and more expensive segments, while Chinese automakers are investing in the mass-market segments.
Both Ford and GM are facing pressure from investors to reduce electric vehicle expenses and increase shareholder returns. Renault and Stellantis have announced plans to return money to investors through share buybacks and higher dividends. Earlier this month, Ford announced that they would distribute around $720 million to shareholders in the form of a special dividend of 18 cents per share.
