Ford to Pull Back On Future Chinese Investments

Ford will be scaling down future investments in China, as the company’s chief executive has suggested that there will be “no guarantee” Western automakers can compete with local electric-vehicle rivals. This should have been obvious to American manufacturers who have historically been required to engage in partnerships with Chinese corporations just to sell within the region. But it also speaks to hardships Ford has endured while trying to break into the market.

The Blue Oval had already hinted that its strategy in Asia would be changing, especially in regard to China. But there will still be a lot of holdover business, regardless of how much it wants to scale back investments. The company has joint-venture partnerships with Jiangling Motors Group, Changan, and Lin Ho, and shares eight factories between them.

It also recently announced the next-generation Lincoln Nautilus for North America would be exported from China, a first for Lincoln. Despite the promised decline in future investment, the company seems interested in making the Lincoln brand a popular luxury marquee, similar to what General Motors managed to do with Buick.

However, Chinese EVs are fairly dominant in Central Asia and Ford seems to believe trying to compete with domestic brands and burgeoning EV firms will be exceedingly difficult.

“If you just reinvest in a new cycle of EVs in China, there is no guarantee, or no data, that would suggest the western companies win,” CEO Jim Farley told the Financial Times in an interview.

“The winners in China [in EVs] turn out not to be the [traditional carmakers],” he continued. “It’s actually all the EV brands like BYD and Tesla, Great Wall, SAIC, and Changan, who are winning.”

This also ties into an earlier announcement made by Blue Oval that suggested it would begin focusing on commercial vehicles while paying attention to what other manufacturers are doing in terms of battery technology — to see what works in China before diving back into electrified passenger vehicles.

From FT:

Global carmakers have been losing ground to domestic rivals that offer cheaper or better electric vehicles, threatening profits in the market that has become a core business for manufacturers such as Volkswagen, Mercedes-Benz or General Motors.

Several carmakers such as VW have vowed to boost spending in the country to try to claw back market share, but Ford plans to take a different approach, Farley said.

“We have been for the last couple of years, really looking carefully at our China business,” Farley said. “And now we have made up our mind where our strategy is going to be, and it will be a much lower investment, more focused investment.”

He declined to comment on local reports on Monday that Ford was preparing to cut 1,300 jobs in the country.

Ford seems laser-focused on margins right now. It has already culled smaller vehicles from the home market because they were less profitable than large SUVs and pickup trucks and has been doing the same in Europe — seeking a leaner, more competitive cost structure with fewer employees.

There are two ways to look at this. Ford could be viewed as playing things smart during a time of economic uncertainty, noting that trade tensions between the United States and China continue to cause problems for the business on both sides of the Pacific. But it could also be seen as a company running scared and trying to rebound from a lackluster 2022 by cutting costs wherever possible. Still, even the less-flattering assessment might be the correct play to make.

[Image: Nick Shoe/Shutterstock]

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