Ford, GM open to partnerships to compete with Chinese EVs

US automakers Ford and General Motors’ chief executives have said that they are open to forge partnerships in order to cut the costs involved in electric vehicle technology as they Chinese rivals push into the US and European markets. GM CEO Mary Barra told investors at a conference that she is open fine-tune the R&D efforts by creating partnerships with others. “If there’s ways that we can 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,” she said.

Ford CEO Jim Farley also opened the door to collaboration with other automakers in order to cut EV battery costs during a separate presentation at the conference. “If you cannot compete fair and square with the Chinese around the world then 20% to 30% of your revenue is at risk” over the next several years,” he said.

The shift in the mood comes as the Detroit automakers and other Western companies have been coming under increasing pressure from Chinese giants such as BYD and other low-cost Chinese electric vehicle makers that are increasingly exporting vehicles to Europe, Latin America and Southeast Asia. BYD is, in fact, considering building an assembly plant in Mexico that could be a base to ship EVs to the United States, Reuters quoted Nikkei.

Ford has predicted that it could lose USD 5 billion to USD 5.5 billion on its EVs this year. In order to compete with BYD’s Seagull model, the company has launched a dedicated “skunk works” team, separated from its main engineering operations, to design a small, low-cost EV. The CEO has said that the company has to make money in the first 12 months with the cat. “If you can’t make money we aren’t launching the car.”

The company is also evaluating its battery strategy. “We can start having a competitive battery situation. We can go to common cylindrical cells that could add a lot of leverage to our purchasing capability. Maybe we should do (this) with another OEM (automaker),” Farley said.

As per Wolfe Research analyst Rod Lache’s estimates, Chinese production costs are 30% lower than Western automakers’ costs. For example, BYD can produce its small Seagull EV for USD 9,000 to USD 11,000 in materials. “Last year, 25% of all vehicles sold in Mexico were sourced in China,” Farley said. “The world is changing.”

After these comments from the automakers, Ford shares were down 1.1% while GM shares were up 1.2% on Thursday afternoon.