Home » Bill Ford Warns America’s Not Ready To Compete With China On EVs

Bill Ford Warns America’s Not Ready To Compete With China On EVs

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I still think that despite, well, everything, President Biden ought to send President Trump a nice card on his birthday every year. Why? Because the Trump Administration’s stiff 27.5% tariff on Chinese-built cars is effectively what’s keeping them out of the U.S. market right now. Now even Henry Ford’s great-grandson is ringing the alarm that we have some catching up to do on the EV front before they inevitably get to U.S. shores.

A fine Monday morning to all of you in Autopia. Our staff has been given the day off out of respect for the Juneteenth holiday here in the U.S., but we have plenty of news and features on tap for you as well. And the rest of today’s news roundup that you’re currently reading includes some interesting details on China’s rural electrification struggles; Mercedes’ challenges around deploying higher levels of automated driver-assistance systems; and more news around the unfortunate Hyundai EV power loss issues. Let’s get started.

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Tariffs Buy America Some Time On The EV Front

2023 Ford Mustang Mach E Premium Interior
Photo: Ford

Everywhere I turn, I find some auto exec who’s at least mildly freaked out about the progress China has made in developing its EV market. The big Auto Shanghai show this spring, the first one since the pandemic broke out, was apparently a wake-up call to the rest of the auto industry; since last we all looked at this still very secretive, closed-off market, China has grown by leaps and bounds not just in EV tech but in keeping costs down. Cost, in particular, is the next big frontier to conquer. Building EVs at scale and ensuring profitably is a ways off for Hyundai, General Motors, Toyota, you name it—while BYD and its ilk are getting better and better at it.

Naturally, the Chinese automakers’ ability to sell (apparently) impressive EVs at low costs with profitable margins flies in the face of the strategy we see here: car companies will finance EV and battery development costs by selling big gas trucks and SUVs, and EVs will stay in the luxury and mid-tier price ranges until costs go down—hopefully helped along by tax breaks. But if a decent BYD EV can be sold here for $25,000, that’s a real problem.

Ford’s Executive Chairman Bill Ford sounded the alarm somewhat on CNN’s Fareed Zakaria GPS recently, and here’s Fortune to summarize:

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Ford Motor Co. Executive Chairman Bill Ford Jr. said the US is “not quite yet ready” to compete with China in the production of electric vehicles and said his company is taking an “all hands on deck” approach to prepare.

“They developed very quickly, and they’ve developed them in large scale, and now they are exporting,” Ford said in an interview on CNN’s Fareed Zakaria GPS. “They are not here, but they will come here we think at some point and we need to be ready, and we’re getting ready.”

China is poised to become the world’s No. 2 exporter of passenger vehicles, potentially reshaping the global auto industry and shaking up the dominance of its car trading partners and rivals. Overseas shipments of cars made in China have tripled since 2020 to reach more than 2.5 million last year, challenging traditional car exporters such as Germany.

This is why the Inflation Reduction Act had such aggressive rules around North American battery and minerals production—if the market goes fully electric, this way we don’t cede total control of that forever to China, which is how things more or less are now.

How long do Chinese cars stay out of our market, given their skyrocketing popularity in Europe and Australia—places where people are sick of sky-high new car prices just like Americans are? U.S. Secretary of State Antony Blinken is visiting Beijing this week and relations between China and the U.S. remain, I don’t know, not amazing. But to me, it feels hard to believe rolling back car tariffs would be on the table anytime soon and not without a significant lobbying fight by the auto industry here.

But Ford’s right here. It’s not a question of if, but when.

China’s Rural Electrification Problem

Byd Seagull Side Profile
Photo: BYD

I also talk to a lot of people in the auto industry and in transportation policy who occasionally border on being delusional when it comes to EVs. By that, I mean they believe that we’ll all just be driving battery cars by 2035 or so, that’s it! We’re done! Planet saved!

Yeah, no fast, I’m afraid. Besides the question of the climate impact of all the gasoline cars that will still be on the road if EVs go mainstream, it’s like… driving EVs where? In what markets? You have to admit it’s easier to electrify in Norway or California or Western Europe than it is India or Africa or Latin America—and those people deserve clean air just as much as more developed areas do.

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And as far ahead as China is in the EV race, it has this same problem too. Here’s a fascinating dispatch from Bloomberg:

It’s not just price and range holding back the hundreds of millions of people who live in the thousands of small cities and rural towns across China. A lack of charging infrastructure and dealerships (many EV makers prefer a Tesla Inc.-like direct online sales channel) also deter people from going electric. Then there’s the mismatch between the sleek, tech-laden EVs popular in the wealthy metropolises of Shanghai and Shenzhen with the need for more rugged and practical vans and light trucks needed to haul everything from work tools to farm goods in rural areas.

While China has the world’s largest clean car market, selling 5.67 million such vehicles in 2022, sales have been concentrated in big cities. Overall growth is slowing and the penetration of EVs in less-developed regions is still relatively low — at 21% of new car sales in the first four months of 2023, compared to around 40% in the largest cities, according to BloombergNEF. Closing that gap is key toward China’s goal of reaching net zero emissions by 2060 and supporting the nation’s auto industry.

China’s automakers still sell a ton of hybrids and PHEVs, too. But the challenges of costs and available vehicle types are limiting EVs for those rural buyers, and the government is trying to juice sales with tax breaks and public-awareness campaigns. They’re hyping the availability of home-charging in rural areas that city-dwellers lack, and the low maintanence costs over time. I just wonder if their electric grids are ready for this—especially since the country still relies heavily on coal for power.

Anyway, it’s interesting to hear China has the same problem as America and many other places in the world, despite the early EV lead.

Mercedes’ Drive Pilot Has Big Promises, Lots Of Questions

Mercedes Benz E Class Amg Line (*european Model Shown)
Mercedes-Benz E-Class AMG Line (*European model)

The automakers are still chasing a dream of full autonomy for cars, but that’s a decades-off, long-term dream; I still think a car won’t be “fully self-driving” until you can take a nap in the backseat anywhere in the world and still get where you’re going without issues. That’s a very high bar to clear.

Mercedes is pushing the envelope soon with Drive Pilot, a Level 3 automated assistance system that in theory would allow this, accodring to Automotive News:

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Mercedes-Benz plans to sell vehicles equipped with Drive Pilot, a Level 3 automated system and the first of its kind in the marketplace. Such a system can maintain control and responsibility of a car in certain scenarios. However, the human driver must take control upon the system’s request. When active, Drive Pilot allows motorists to shift their attention from traffic, according to the company.

Which doesn’t sound great to me, honestly? This sounds a bit like Tesla’s Full Self-Driving Beta system (it’s nothing of the sort, to be clear) where I end up expending more mental and emotional energy minding the car than I would actually driving it myself. So one researcher describes L3 systems the way I’d describe one of our staffers’ project car ideas:

Level 3 systems are “an engineer’s dream and a plaintiff attorney’s next yacht,” said Bryan Reimer, a research scientist at the Massachusetts Institute of Technology. His work leading the Advanced Vehicle Technology Consortium examines how drivers use automated systems.

Conceptually, Level 3 automation might allow motorists to read a book, watch Netflix or text their friends. But Mercedes-Benz declined to specify whether those activities would be permitted when Drive Pilot is engaged.

Such ambiguity surrounding what a motorist can or cannot do is one offshoot of a more complex problem: understanding of who — or what — is responsible for a vehicle’s operations.

As that article explains, in an L3 system, the “human” is not considered the “driver” anymore. Drive Pilot is slated to launch on 2024 Mercedes S-Class and EQS sedans this year and on certain roads in Nevada and California, it’ll be capable of driving up to 40 mph. But the legalities around what a human passenger will be allowed to do in such a car, and who’s responsible if something goes wrong, will remain unclear for a while.

One MIT study cited here said it took an average of 6.1 seconds for a person’s attention to fully return to driving when prompted by the car. A lot can go wrong in six seconds.

NHTSA Gets Involved In Hyundai Power Loss Issues

Hyundai Ioniq 5 Press
Photo: Hyundai

Everybody loves the Hyundai Ioniq EVs, but they haven’t been without their problems. One annoying issue has led to a severe battery drain that’s left motorists stranded at times, as we reported a few months ago.

Now America’s federal safety regulator is stepping in. Here’s the Associated Press:

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Multiple U.S. owners of Hyundai’s popular Ioniq 5 electric SUV have complained of completely or partially losing propulsive power, many after hearing a loud popping noise, the National Highway Traffic Safety Administration said Saturday.

The Office of Defects Investigation at the NHTSA has opened a preliminary investigation and says Hyundai indicated in an initial review that a power surge was damaging transistors, preventing vehicles’ 12-volt battery from recharging.

Hyundai spokesperson Ira Gabriel said the company was fully cooperating with the investigation and was launching a service campaign in July to update affected vehicles’ software and, if necessary, replace the component involved. It’s called an Integrated Control Charging Unit.

Building cars is hard—especially these new ones.

Your Turn

Chinese cars in America? Rural electrification? What’s your take on all of it?

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Robot Turds
Robot Turds
11 months ago

China has had tariffs on American cars for decades. Their government has not being playing fair when it comes to doing business and we – or rather- corporate executives- are to also blame for eagerly agreeing to the communist party’s demands: Sure. Come and setup a factory. But all of the IP and know-how had to be shared with a Chinese partner. Result? Chinese companies gained 100+ years of know-how for free in the space of a few decades.

And there is nothing to do to stop it. Its a perfect storm: the communist party will ensure that their workforce are forever poorly paid and in permanent debt paying for overpriced apartments. There is simply no way any developed country can compete with that sweet, cheap labor.

I have no problem with we doing the same thing. We need to protect our own industries and the millions that work in them. But Ford is right. This is a wakeup call. And all American automakers needs to be putting all of their efforts into upping their EV game

Boxing Pistons
Boxing Pistons
11 months ago

I spent a lot of time in China 5+ years ago, and was amazed that anybody could afford a car given the high prices ($40k for a Passat at the time!) and the low wages even for skilled workers. Most of the people at our factory commuted on little electric bikes that looked like they were made for kids. I guess it makes sense that stuff like the Changli started popping up, along with cheaper “real” cars. We have seen China make some “big” bets in the past which is the nature of a communist country – building huge apartment complexes that stood empty for years, and stockpiles of surplus steel come to mind. Their bet on EVs will probably work out a little better for them.

NosrednaNod
NosrednaNod
11 months ago

about the progress China has made in developing its EV market…

… because the Chinese auto market is what is DRIVING the push for electrification.

Lokki
Lokki
11 months ago
Reply to  NosrednaNod

At the risk of being that old man shouting at clouds, I want to caution you not to be misled by any “China is the leading in X” statistics. It is always true but, without further perspective, it can be deceptive. That is, with a billion people, China is the leader in anything you care to measure.

For example, take a look at this statistic about hard coal production:
https://www.statista.com/statistics/264775/top-10-countries-based-on-hard-coal-production/

NosrednaNod
NosrednaNod
11 months ago
Reply to  Lokki

From my understanding, national and local governments in China have been driving the push towards EVs with subsidies and policies to a greater extent than any other country.

Lokki
Lokki
11 months ago
Reply to  NosrednaNod

You might find this interesting:

China is Throwing Away Fields of Electric Cars –
Letting them Rot!

https://www.youtube.com/watch?v=1SEfwoqKRU8

Last edited 11 months ago by Lokki
JDE
JDE
11 months ago

Again, it goes back to poor treatment of the Chinese populace. I cannot say I can actually find many things without some form of Made In china Logo on something, but this being June 19th, you would think we would be more frustrated by slave wages and civil rights abuse…not to mention supporting a Russian ego-maniacs war on Ukraine.

I would say I would have to really be desperate to buy any vehicle made in china wholly.

Mr Sarcastic
Mr Sarcastic
11 months ago
Reply to  JDE

Yeah been saying the same thing but slave labor never gets mentioned. But given low wages no wonder china sales are down. In rural areas with 4 hours of electricity a day and 20 years of income no wonder no sales. Yeah Europe will sell their first born for easy answers and 3 months paid vacation, dont worry the US will bail us out again. I am surprised they didnt have to steal this tech like everything else, i doubt it is safe and dependable, probably comes with the new corona virus. We should refuse all chinese products until they have equal pay as our union labor. Apparently $60,000 a year is too little for a ford employee but zero pay in china everyone is ready to buy.

Boxing Pistons
Boxing Pistons
11 months ago
Reply to  Mr Sarcastic

They’ll throttle electricity at a moment’s notice, too. It’s nuts. Most people over there ride little electric bikes that a kid would tool around on here. Seeing 3+ people on one or a bundle of pipe isn’t unusual.

Cerberus
Cerberus
11 months ago
Reply to  JDE

It is frustratingly difficult to find stuff not MIC. When you can, it’s a LOT more money than the MIC version rather than a small amount. If I didn’t make stuff, I’d hardly buy anything, but even with that, tools and materials still often come from China with little alternative. On top of that, their bargain prices and quality forced everyone else’s quality down to try to compete at any level whatsoever without also moving manufacturing to China so that there’s not much mid-market for a lot of things, just cheap MIC junk, more expensive and only slightly better not-MIC junk, and super expensive high end stuff that could still be MIC (but at least won’t be junk).

Boxing Pistons
Boxing Pistons
11 months ago
Reply to  Cerberus

What’s really disturbing is that we’ve just given up the capability to make a lot of this stuff, leaving China as the sole source. I try so hard to find made in USA or pretty much anywhere other than China, but it is extremely difficult, and I often get my self in trouble with my wife with the premiums I am willing to pay for domestic goods.

NosrednaNod
NosrednaNod
11 months ago
Reply to  JDE

The average wage in the US is 3.5 times the average wage in China and the cost of living in the US is 2.2 times the average cost of living in China. So the idea that Chinese workers are making “slave wages” is not exactly true.

Greg
Greg
11 months ago
Reply to  NosrednaNod

except for the actual slaves. Oh, and active genocide. But yeah, Go CHINA!

Robot Turds
Robot Turds
11 months ago
Reply to  NosrednaNod

When you figure the cost of real estate in China, their cost of living is actually a LOT higher than the US. China now has the world’s most expensive real estate. And its a serious problem because it has also turned into history’s most inflated housing bubble. Given that the average Chinese citizen doesn’t invest in the stock market that means almost all of their wealth is instead tied to real estate. And a lot of that real estate is in the form of unfinished concrete high rise apartments.

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