Ford $F ( ▲ 0.28% ) CEO Jim Farley has been making multiple trips to China each year to study Chinese automakers, who now control 70% of global electric vehicle production.
"It's the most humbling thing I've ever seen," Farley told Walter Isaacson at the Aspen Ideas Festival last week.
Driving the news: For found that Chinese EVs integrate with technology seamlessly. Drivers get in the car and their phone pairs automatically, and an AI companion equivalent to ChatGPT handles everything from navigation to entertainment. The vehicles also have facial recognition that knows which seat someone is in and adjusts media preferences.
"Their cost, their quality of their vehicles is far superior to what I see in the West," Farley said. "We are in a global competition with China, and it's not just EVs."
Between the lines: China built massive overcapacity that creates export power.
The country has 20 million units of domestic demand but 40 million units of manufacturing capacity, meaning they can flood global markets without building additional plants.
That manufacturing base also gets government support American companies don't receive.
And that dependence on Chinese suppliers is already causing problems. Ford shut down plants for three weeks recently because they couldn't source high-power magnets that go into speakers, seat motors, wipers, and door systems.
"We cannot get any high power magnets without China," Farley said.
Ford's answer: Three years ago, Farley created a Skunkworks facility in Southern California, completely separate from Ford's traditional operations. The team includes Alan Clarke, who was the chief engineer of the Model Y and Model 3 at Tesla before joining Ford. And the group has one goal: building the "Model T of EVs" for the super-affordable segment.
"When Henry Ford decided to democratize the V8 in 1932, he took 10 people and they quit the company. He put them in Greenfield Village and they developed 20 or 30 different versions of V8 until they settled on the one," Farley said.
The modern team follows the same strategy. The skunkworks team works separately from Ford's main operations, then integrate successful designs back into manufacturing.
Current affordable EVs are essentially created by manufacturers to generate EV credits that allow them to sell trucks.
"There aren't that many [affordable EVs] here. There's actually really none. And the ones that are here are kind of compliance vehicles," Farley said.
Bottom line: Ford's affordable EV project will need to internalize lessons from global competition, and build domestic capabilities that can genuinely compete on cost and quality.
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