24/7 Wall St. Insights

• Ford Motor Co. (NYSE: F) CEO Jim Farley says he sees the Chinese car industry as an “existential” threat to the company he leads.
• Also: Dividend legends to hold forever.

In a lengthy article in The Wall Street Journal, Ford Motor Co. (NYSE: F) CEO Jim Farley says he sees the Chinese car industry as an “existential” threat to the company he leads. In short, the rise of fast-growing and tech-savvy electric vehicle (EV) companies in the world’s most populated nation could crush car manufacturers who do business in the United States. This includes America’s Ford and General Motors Co. (NYSE: GM), which have ruled the U.S. market for over a century.

As Farley toured China and examined autos made by local giant BYD, he saw high-quality, sophisticated cars worth around $20,000. BYD’s Seagull has a price that starts at $10,000. The average price of a new one sold in the United States is $55,000.

“Either he can make us uncomfortable, or we can wait, and the Chinese can make us uncomfortable,” Doug Field, a former Tesla and Apple executive hired in 2021 to lead Ford’s technical transformation, told the Journal. “At least one reason Ford should be anxious is because the Chinese government has helped the local EV manufacturers build their companies.”

Ford faces one other mountain to climb, but that is not due to the challenge from China. Ford is still a gas-powered-centric company in a gas-powered market. EVs have not caught on in America. They are about 9% of new cars sold in the United States. The figure would be worse if the number were at least twice that in California. Ford cannot get Americans to change their habits. U.S. buyers are worried about battery range, the number of charging stations, and the high cost of new cars.

Ford has retreated from the EV business, perhaps because it had no choice. Its planned $30 billion has been put on the back burner because sales are slow. Its F-150 full-sized pickup is 37% of all its U.S. sales and is a heavy gas guzzler.

What is saving Ford from an onslaught of Chinese imports? Almost exclusively high tariffs from the U.S. government, which are 100%. Those tariffs won’t last forever. Depending on which candidate wins the presidential elections, the size of those tariffs could come down. And finally, there is the U.S. consumer who may not want to pay over $50,000 for a new EV if a $20,000 one is available.

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