3.1 Reasons why Ford's electric car development in China lags behind other competitors

Reason 1

Compared to its competitors, Ford's grasp of China's policy on new energy vehicles 

( NEVs )  is untimely.

The Chinese government issued The Planning for the Development of the Energy-Saving and New Energy Automobile Industry (2012-2020) back in 2012. In this document, the Chinese government shows its expectation and support for strengthening international cooperation and exploring new commercialization models to promote new energy vehicles. 

Other essential and significant policies include the following:

①

NEVs imported for personal use are duty-free, according to the Announcement on Executing Industry Restructuring Guidance Catalogue (2011)

②

The Chinese government promotes electric vehicles through its procurement power.

### Within five years, 50% of all new cars acquired by China's central government must be new energy vehicles, according to a May 2016 directive.

③

Each Chinese car producer and importer must produce or import at least 10% electric vehicles by 2019.

In the face of numerous favorable policies and incentives, Ford China seems to be unmoved and is still moving at a slow pace in the field of new energy vehicles. While the competitors continue developing new models and investing heavily in modular platforms, Ford has only made a few conservative attempts, such as partnering with local Chinese car brand Zotye and sharing modular platform MEB (built with Volkswagen's investment)with Volkswagen.

MEB( Modular Electric Drive)

In contrast to Ford's conservative actions, Tesla, also an American brand, has quickly taken the opportunity to enter the Chinese market during the years when the Chinese government has been vigorously promoting the development of NEVs. With nearly 8 years' efforts, Tesla has gradually gained a firm foothold in the Chinese market under the country's multiple incentives for the consumption and sale of NEVs. Even at the end of 2019, Tesla officially inaugurated its super factory in Shanghai ( Tesla Giga Shanghai), China, the first Tesla super factory outside of the United States.

Tesla Giga Shanghai

Reason 2

Poor sales results and financial crisis and its knock-on effects continue to slow down Ford's electrification transition (electric revolution) in China.

According to Ford's official website for Ford's sales in China from 2016 to 2019, annual sales are in a steady decline, and the annual sales in 2019 are not even half of those in 2016. This figure is terrifying and alarming and inevitably adds to the pressure on Ford's sales and operations in the Chinese market. 

Against the backdrop of sluggish sales results, it can be noted that there have been considerable personnel changes at the top of Ford China since the start of 2018. Marked by the arrival of the new President and CEO, Anning Chen, Ford China has continued to bring in several local Chinese executives. Although the former CEO, Jason Luo, claimed that his departure was due to personal reasons, it is still difficult not to link this series of personnel changes to rescue the sales slump. 

Anning Chen

When Ford China focuses mainly on restructuring a new top team to salvage its dismal sales results, it is increasingly unrealistic to concentrate enough manpower and resources on developing and producing NEVs. 

In this series of personnel changes, the departure of Zhu Jiang, Chief Operating Officer of the Electric Vehicle Division and head of the Mustang Mach-E electric vehicle project, has undoubtedly added to Ford China's confusion and concern about the road ahead for NEVs during a period of time.

According to Ford's annual report data from 2016 to 2020, net income shows an overall downward trend. Even in 2020, net income is in deficit, the first time Ford has suffered an annual loss since the global economic crisis of 2008.

In response to salvage the crisis of a steady decline in annual net income, Ford's first move was not to switch to the new energy vehicle market but to adjust the layout of the sales of traditional fuel vehicles. Ford cut back on numerous low-margin or unprofitable car models instead of selling higher-margin trucks and commercial vehicles.

With the focus on restructuring the sales of conventional fuel vehicles, Ford has apparently overlooked the importance of timely electrification and has failed to balance its innovative business with its traditional business.

New energy vehicles are very new to traditional car companies like Ford, so it is difficult for Ford to make an accurate estimate of the amount of money and manpower that will need to be invested in the initial stages of development. Given the enormous financial pressure and the unpredictable capital investment, it is difficult for Ford to make a quick decision on whether to prioritize the development of new energy vehicles or the adaptation of traditional models. Ford is also not confident about the return on investment in the new energy vehicle sector.

Reference:

2012. The Planning for the Development of the Energy-Saving and New Energy Automobile Industry (2012-2020).

Briefing, C., 2021. Shifting Gears: Investing in China's Electric Vehicles Market - China Briefing News. [online] China Briefing News. Available at: <https://www.china-briefing.com/news/china-shifts-gears-electric-vehicles/> [Accessed 18 October 2021].

2011. the Announcement on Executing Industry Restructuring Guidance Catalogue (2011).