Key Points
Chinese automakers have quickly graduated from student to master in the global automotive industry – especially in EVs.
Ford pivoting from competing in China’s domestic markets to exporting vehicles as reversed its financial losses.
Ford’s joint venture with Geely opens up the door to lower costs in Europe, while learning valuable operating and EV development knowledge.
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“I think you have to see the [Detroit Three] exit China as soon as they possibly can,” said Bank of America securities analyst John Murphy, at his annual presentation of “Car Wars,” a closely watched industry report.
That warning was sent just over two years ago as analysts saw what was coming: intense competition in China’s domestic market. The brutal price war, long list of competitors, rapid electric vehicle (EV) technology development, and other things have all made life for foreign automakers extremely difficult in China. Furthermore, competitors Ford Motor Company (NYSE: F) and crosstown rival General Motors (NYSE: GM) want nothing to do with having Chinese automakers invade their U.S. profit engine. With Ford stuck in between a rock and a hard place with the Chinese, the company has made two massive moves to evolve its business — and it’s working well.
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Not exiting, but exporting
Rather than exit the market entirely, Ford opted for a strategy that has quickly caught on: Use Chinese operations as an export hub. Ford decided to scale down investments in local sales and has, at least for now, repurposed its joint ventures, Changan Automobile and Jiangling Motors, to export its vehicles globally. Made-in-China vehicles such as the Equator Sport crossover, Mondeo sedan, Lincoln Nautilus SUV, and electric commercial vans make their way to Southeast Asia, the Middle East, South America, and the big one, Europe.
Ford will build a brand around racing heritage and off-roading to try and boost sales in Europe. Image source: Ford Motor Company.
Ford posted six consecutive years of financial losses in China, stretching from 2018 through 2023. Finally, in 2024, Ford snapped its ugly streak of losses in China and posted roughly $600 million in earnings driven largely by its pivot to exports. Ford’s most recent move reflecting its “In China, for the World” strategy is to export its Ford Transit City from China to span 52 countries and regions across five continents.
This strategy, in my opinion, seems far more productive than exiting such a massive automotive market, especially when dynamics can change a few years down the line. When life gives you lemons, make lemonade: Ford is using its production capacity and joint venture know-how to lower costs, improve efficiencies (learning “China Speed”), and diversifying its global manufacturing footprint. Ford takes it a step further with its next strategy regarding China.
If you can’t beat ’em…
Pending regulatory approvals, Ford and Chinese automaker Geely will together build vehicles at a Ford plant in Spain under a new joint venture in Europe. The goal is to begin operations in the first half of 2027, with the earliest new vehicles planned to drive off the production line in 2028. As it stands, Ford is set to own 66% of the joint venture, with Geely owning the remaining 34%, and it’s expected to result in a new Ford EV crossover, a new member of the Bronco family, and two electric Geely SUVs.
Ford and Geely’s joint venture essentially admits there’s a new global reality with intensifying competition and relentless cost pressure, and as the Chinese did decades ago from foreign automakers, it’s time for Ford to learn how the Chinese have drastically lowered costs by commoditizing certain parts and cut the design process time in roughly half. It’s a sound joint venture that benefits Geely as well. While the Chinese are rapidly trying to export vehicles from China and expand globally, using underutilized production capacity of legacy automakers can be a fast and cost-effective solution to building their own local factories from the ground up, or facing margin-eroding tariffs.
What it all means
Ford is navigating the complicated global automotive waters well, considering that the company has reversed years of ugly losses without exiting China and taking massive charges, thanks to its pivot and booming exports. Not only that, but Ford has also wedged its foot in the door of a potentially invaluable joint venture where it can learn, in theory, how to drastically reduce the costs of its design process and speed it up. For context, the industry considers a typical design process for an all-new vehicle to be between 40 and 60 months, sometimes up to 80, while the Chinese do the same process in 18 to 24 months.
In all, while Ford wants nothing to do with Chinese competition entering the lucrative U.S. market, nor does it want to compete in a brutal China domestic market, the Detroit icon also understands it has much to gain in joint ventures and exports that tie it directly to China — and it’s working.
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Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.
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