We hear it all of the time. “The only reason that China’s auto industry is so far ahead on electric vehicles is because it was so heavily subsidized by the government,” critics say But that sentence is only partially true. It’s certainly accurate that some Chinese automakers are state-owned, and that nearly all have benefitted generously from national, state and local subsidies and tax exemptions—some $231 billion over 15 years, by certain projections.
Yet that’s only part of the story. The other part is that China’s automakers leveraged lower labor costs and the country’s massive engineering workforce, learned from their Western joint venture partners and other companies (especially Tesla) and dealt with intense internal competition within the country’s growing new car market. All of those factors combined to create a generation of new EVs, plug-in hybrids and extended-range EVs (EREVs) that the rest of the world is trying to catch up to.
I bring this up because Ford’s investors certainly did this week during the Dearborn automaker’s fourth-quarter earnings call. And in Ford CEO Jim Farley’s mind, regardless of whatever help the Chinese automakers get, the American ones still need to get ready for a “street fight.”
“We need to work with our government partners to make it a level playing field as much as possible,” Farley said. “But at the end of the day, it’s management’s responsibility to beat the [Xiaomi] SU7 straight-up in a street fight.”
The SU7, a hot-selling Chinese software-defined EV from the global smartphone giant, is a car Farley knows well. Last year he revealed he imported one from Shanghai directly and spent several months driving it to suss out its competitive advantages. By the end, he said he didn’t want to give it up.
But even Farley will admit that Ford has a long way to go before it can compete with China on battery tech, as well as the advanced software features that make the SU7 special, like deep integration with Xiaomi’s phones and tablets and their vast app ecosystem.
Farley was asked if he thought U.S. tariffs—which currently impose 100% duties on China-made EVs—would be enough to keep those cars out of the country long-term. He demurred on the topic of if or when Ford might have to compete with the likes of BYD on its home turf; most auto executives have shied away from weighing in on that directly. But he stressed that it’s an ongoing concern for Ford.
“The overall tariff and trade situation, the growing importance of digital vehicles, the Chinese [automakers] growing to become a global reality, these dynamics will all play out for some time to come, but Ford controls its future,” Farley said.
Photo by: Ford
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Ford has had its share of wins when it comes to the future. The Mustang Mach-E is perennially one of the top-selling non-Tesla EVs in the U.S. and the F-150 Lightning was the first modern electric pickup from a legacy automaker. It’s also made some big inroads into fleet electrification, charging access and next-gen software.
But Ford has struggled where it counts—namely making money from those EVs. Ford breaks out its EV division’s financial results separately from those of its gas-powered cars, and due to still-high capital and battery costs, it lost $5.1 billion on going electric in 2024. This year is projected to see similar losses. That, and sales below once-rosy projections, have led Ford to rethink its EV strategy over the past year.
Ford canceled a three-row electric SUV last summer and delayed an all-electric pickup truck expected to be a Lightning successor. It is still, however, working on a from-the-ground-up “skunkworks” platform designed to compete with low-cost Chinese EVs, and is focused on hybrids and now EREVs in the meantime. On that call, Farley said he sees less of a future path for large electric utility vehicles due to their battery costs, but thinks there is value in large commercial trucks for other customers.
For now, Ford doesn’t have to compete with Chinese EVs in the U.S. But if the trade environment were to change, it’s going to be a different calculus.
“On the kind of ‘unfair’ part, or the subsidy part, I think we will have to sort that out as a country,” he added later. “Because they’re part of the competitive environment that, when you list the kind of advantages the companies have, it’s like a page long. So we have to resolve that. But at the end of the day, what I learned after 40 years in this industry is the company has to stand on its own, toe-to-toe with the cost of those companies, and the product appeal of those companies.”
Photo by: InsideEVs
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Farley has been candid before about the U.S. auto industry’s struggles when stronger new players from Japan, Europe and Korea entered the market in force. Especially against the Japanese automakers, import tariffs didn’t work in the 1980s. They led the companies to build cars domestically and establish luxury brands like Lexus that could charge higher premiums than your average family sedan.
That may also be why Farley suggested that automotive imports face tariffs across the board, and not just when they’re from China.
“What doesn’t make sense to me is why are we having this conversation while Hyundai-Kia is importing 600,000 units into the U.S. with no incremental tariff, and why is Toyota able to import half a million vehicles in the U.S. with no incremental tariffs,” Farley said. “If we’re going to have a tariff policy… it better be comprehensive for our industry. We can’t just cherry-pick one place or the other because this is a bonanza for our import competitors.”
At the same time, all three of those competitors—the South Korean ones in particular—are ramping up domestic production of their EVs. The Hyundai Motor Group now builds the Ioniq 5 and Kia EV9 in the U.S., and soon will do the same with the Ioniq 9 and Kia EV6. And Toyota recently opened a new battery factory in North Carolina in anticipation for more domestically-built hybrids and eventually more EVs, including an expected three-row SUV.
In the meantime, Ford is gearing up for that “street fight” Farley mentioned by focusing on software development and revenue, future EV models due out by 2027 and growing the BlueCruise automated driving system’s user base. But Farley warned investors that Ford has a tricky year ahead with those EV costs and tariff uncertainty on top of it. Plus, the new car market is skewing toward more affordable cars in general, and that’s especially true on the electric side.
“We are going to invest in affordable vehicles, but we have to do it profitably, which means a transformation at Ford,” he said.
Contact the author: patrick.george@insideevs.com
