Forget Tesla, the real competition in electric cars is low-cost Chinese automakers. That's what Ford CEO Jim Farley told the Wall Street Journal recently. He said he has a plan as an electric car maker looks to take America by storm. BYD — short for Build Your Dreams — could pose a threat to Ford and other U.S. automakers if speculation holds true and the Chinese automaker builds an electric vehicle factory in Mexico. According to a report published by the Nikkei in mid-February, the factory could be used as an export hub to penetrate the US market and help evade high tariffs on freight vehicles from China. Farley commented last year on the threat posed by Chinese automakers — specifically praising BYD, a company that Warren Buffett's Berkshire Hathaway has been working to reduce. “I love BYD,” Farley said at the Morgan Stanley summit. “A vertically integrated, aggressive company…a very impressive company. And they've always been committed to electrification.” At a Wolf Research investor conference earlier this month, Farley said success in the electric vehicle market lies in the ability to compete with Chinese companies whose cars have already saturated the car markets in China and Europe. “The world, 20% or 30% of your revenue is at risk.” Farley wants to be prepared even if the U.S. government intervenes to limit the reach of Chinese automakers. He said creating a “Skunkworks team” of new talent at Ford to work on creating cars Affordable electric was “the biggest and smartest decision we've made as a team.” He declined to offer any predictions on when the team, which was formed two years ago, might have anything viable. He explained: “I've been in the forecasting business in the electric vehicle space. And it hasn't really been a great ride.” Tom Narayan, an analyst at RBC Capital Markets, said BYD's entry into the US market is “absolutely negative” for Ford “but not catastrophic.” While Chinese OEMs like BYD are expected to succeed in Entering the United States and potentially posing a threat to electric vehicle competitors, its presence will not “eat up a lot of market share” from the Detroit Three, which includes Ford, General Motors and Chrysler. Narayan – owner of Stellantis – explained that the Ford Blue division holds internal combustion engine (ICE) and hybrid vehicles and the and Ford Pro fleet programs and the unprofitable Ford Model e EVs unit. Several automakers, including Ford, have reported a slowdown in electric vehicle sales as consumers are reluctant to switch from gas to electric. As a result, electric vehicle prices are being reduced by Everyone, including Tesla, to stimulate interest. Ford Model Last reduced production of its all-electric F-150 Lightning pickup truck to achieve “the optimal balance between production, sales growth and profitability,” according to the automaker. Last week, Ford confirmed some quality issues with its 2024 Lightning trucks. “Auto companies that are spending tens of billions of dollars in electric vehicles at a time have cut back on building carbon engines,” Jim Cramer said at the CNBC Investment Club's second annual meeting on Saturday. “traditional.” The big promise of moving from ICE to EV is taking longer and facing tougher resistance from consumers. That's why Ford, in a move called for by Jim, is putting more energy behind high-margin hybrid vehicles. About BYD BYD has become the world's largest electric vehicle maker by expanding its presence in international markets while dominating its home country of China, the world's second-largest economy. In an effort to highlight a broader spotlight, BYD unveiled a new electric supercar on Sunday called the U9 that can reach speeds of more than 190 mph. The supercar is part of BYD's luxury brand, Yangwang, and is valued at more than $233,000 or 1.68 million Chinese yuan. It has been compared to other legacy supercar brands such as Ferrari. Deliveries of the U9 are expected to begin this summer. It remains to be seen whether there will be a market for BYD's supercar, but it certainly raises the company's profile around the world. In 2023, the Chinese automaker sold more than three million cars globally, according to its annual sales report. BYD said exports grew 334% last year across 70 countries on six continents. Like Ford, BYD also sells hybrid vehicles. Of the three million battery-powered cars sold last year, about 1.4 million were hybrids. BYD's rapid success has helped it expand into several key global markets. The company recently announced its expansion into Indonesia with plans to build an electric vehicle factory there. The carmaker already has agreements to invest in factories in Hungary, its first in Europe, and in Thailand. Given its ambitions for continued growth, BYD setting its sights on Mexico makes sense. It is one of the largest automobile manufacturing centers and exporters in the world. The majority of vehicles made in Mexico are exported to the United States. Many of the world's largest automakers choose to partner with companies in Mexico to take advantage of lower production, labor and energy costs. Since Mexico is a regional trading partner with the United States, automakers have clear access to the North American market and easily expand exports to regional markets. Ford Advantages While the electric vehicle strategy continues to evolve, Ford has a strong foothold in ICE vehicles, hybrid vehicles and in the dependable commercial market. RBC's Narayan called Ford Pro the company's “profit center.” Ford's Farley said at the Wolfe conference that there are a lot of surprises on the upside in the Pro. “If you are looking for the future of the auto industry, stop looking at FDS [full self-driving] “And Tesla,” he said, “look at the Ford Pro. We haven't reached the top in Pro yet.” However, as a hedge against competition, Ford continues to innovate by expanding its F-Series vehicles. The automaker is preparing to build a second-generation electric pickup truck coming in 2025 and a three-row electric SUV expected in 2026. Jeff Window said, Ford's focus on hybrids also gives it “additional leverage” to offset losses in the Model E, the analyst at Edwards said. Jones. He explained that the company's trucks and SUVs were more popular with consumers and generated higher profits for the company. To be sure, the profitability potential of Ford's electric vehicle business remains under pressure. Ford said it expects Model E losses to widen to $5 billion to $5.5 billion in 2024 from $4.7 billion last year — driven by pricing pressures and investments in next-generation vehicles. While Farley declined to provide updated guidance on EV losses, he said gross margins will improve over the year and will get close to breakeven. Cheaper battery costs should also contribute to narrowing EV losses, as Ford moves aggressively toward lithium iron phosphate (LFP) batteries for its EVs, according to analysts. Narayan said this is a more “cost competitive” option for electric vehicles that could help improve the economics of Ford's electric vehicle manufacturing and production. Ford remains committed to achieving its goal of reaching a run rate of 2 million electric vehicles globally by the end of 2026. Ford investors should not be concerned in the short term since Chinese EV competitors will not enter the market overnight. Narayan estimates that BYD will pose a long-term threat to the US electric vehicle market. “This takes time. They have to produce and set up a factory in Mexico, and they may face tariffs. There are a lot of countervailing things that could happen,” the analyst said. The United States is unlikely to stand idly by and allow Chinese automakers to access the American market through Mexico. “I don't think in an election year any of the presidential candidates would allow that to happen,” Jim said at the club's annual meeting on Saturday. To that end, a group of lawmakers urged the White House to increase tariffs on Chinese vehicles and find a way to “prepare to handle the next wave” of Chinese vehicles by other U.S. trading partners. The Biden administration, according to a recent Bloomberg report, is considering restrictions beyond tariffs that would apply to Chinese vehicles regardless of where they are assembled. Narayan also suggested that by the time BYD becomes a competitive threat in the US, Ford Model e's finances should improve. Production costs will become more efficient, resulting in a more competitive and profitable Ford EV product. Edward Jones' Windau also highlighted the industry's “long, ongoing transition period” from internal combustion engine vehicles to electric vehicles. The slowdown of electric vehicles in the US does not bode well for EV companies and is certainly a negative for BYD if it wants to compete in the US EV market. The analyst noted that hybrid cars are “getting much more interest.” But this is where Ford has been able to gain strength. (Jim Cramer's Charitable Trust is long F. See here for a full list of stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you'll receive a trade alert before Jim takes a trade. Jim waits 45 minutes after a trade alert is sent before buying or selling a stock in his charitable fund's portfolio. 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The Ford Motor Company logo in Inwood, New York, on February 5, 2024.
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He forgets TeslaThe real competition in electric cars is low-cost Chinese automakers. That's what stronghold CEO Jim Farley recently told the Wall Street Journal. He said he has a plan as an electric car maker looks to take America by storm.
