Ford & GM vs. BYD: US giants team up, can they win?

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CEOs of American automakers Ford and General Motors said on Thursday they would consider partnerships to cut electric vehicle (EV) technology costs, citing the Chinese offensive in European and North American markets.

America seeks a recipe for the Chinese offensive

“If there are ways to partner with others, especially on technologies that are not consumer-facing, and be more efficient with R&D as well as capital, we’re all in,” GM CEO Mary Barra told investors at a conference sponsored by leading research firm Wolfe Research. – Full transcript by SeekingAlpha.com.

Ford CEO Jim Farley opened the door to collaboration with other automakers on EV battery cost reduction during a separate presentation on Thursday. – Full transcript by SeekingAlpha.com.

Detroit companies and other Western automakers are facing increasing pressure from BYD and other low-cost Chinese automakers that are accelerating vehicle exports to Europe, Latin America and Southeast Asia. BYD is currently considering building an assembly plant in Mexico that could serve as a base for shipping EVs to the United States.

Ford projects it will lose $5 billion to $5.5 billion on EV production this year. The company has created a dedicated “skunk works” team tasked with designing a small EV that could compete with BYD’s Seagull model. Ford is also evaluating its battery strategy.

Jim Farley said that he might consider working with rivals to produce a cheaper battery.

Chinese brands can produce cheaper

“In terms of material costs, BYD can produce its small Seagull EV for $9,000 to $11,000,” Farley said.

Wolfe Research analyst Rod Lache said Chinese production costs are about 30% lower than those of Western automakers. “Last year, 25% of all vehicles sold in Mexico were made in China,” the Ford CEO added. 

Farley also said he has ordered Ford engineers to develop a new, affordable EV that must start making money in the first 12 months. If that doesn’t happen, the car won’t be launched.

Mary Barra said General Motors is on track to overcome supply chain issues and also to fix software bugs that delayed the launch of the Chevrolet Blazer this year. GM missed its EV production targets in North America in 2023, partly due to problems with battery module production. As for China, the GM brand will focus primarily on the premium and higher-priced segments, as domestic Chinese producers are pushing into the mainstream market segments.

Both Ford and GM are facing pressure from investors to cut EV spending and return more money to shareholders. Ford said in early February that it would return about $720 million to shareholders in the form of a special dividend of 18 cents per share.

Source: SeekingAlpha

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