Hackett's Big Bet: New Electric Vehicle Plant / Brand in China

[Anthony]

https://www.forbes.com/sites/joannmuller/2017/11/08/hacketts-first-bold-move-at-ford-a-750-million-factory-to-build-electric-vehicles-for-china/#1865ff233d67

Ford Motor Co.'s board of directors switched CEOs earlier this year because it wanted a leader who would move more swiftly and decisively to capitalize on growth opportunities. Six months into the job, the new boss, Jim Hackett, made his first big bet today, announcing a new factory in China to build electric vehicles.

Ford is actually making several big bets rolled into one. It's working with a new Chinese partner, Zotye, and together they will invest 5 billion RMB (about $756 million) for the new 50-50 jointly owned factory, which will produce a range of affordable EVs. Importantly, those vehicles will be sold under a new local Chinese brand.

The new China-only brand, not yet disclosed, represents a big shift for Ford, which spent the past decade shedding most of its brands to put all its global marketing efforts behind its core Ford "Blue Oval." The "One Ford" mantra was the cornerstone of former CEO Alan Mulally's global strategy, and continued under his successor, Mark Fields, who left under pressure in May.

Full article at link above

Edited November 8, 2017 by Anthony

[Pioneer]

http://www.blueovalforums.com/forums/index.php?/topic/64070-ford-signs-756m-deal-with-zotye-to-build-electric-car-plant/&do=findComment&comment=1013349

[jpd80]

These are nothing more than compliance vehicles so that Ford can continue selling its other vehicles in China

and quite frankly, that's all I see Model E ever being..

Edited November 9, 2017 by jpd80

[bzcat]

These are nothing more than compliance vehicles so that Ford can continue selling its other vehicles in China

and quite frankly, that's all I see Model E ever being..

 

You don't setup a new JV and $800 million plant to build a compliance vehicle. China is the largest EV market and the demand is real.

 

But the impetus here is that the Chinese Govt will only allow new foreign car company JVs if it is focused on EV. Ford is already maxed out with 2 existing JV, and one of them (Jiangling) is really small - basically, Ford choose its partners badly at the beginning... so it must now think outside the box to continue bulking up in China. Ford's main JV partner in China is Chang'an but Chang'an is very aggressive in growing its own business and it has been slow in investing with Ford on new plants to add capacity for Chang'an Ford. For example, the new Focus plant in Northeast China was part of a lengthy negotiation with Chang'an because Chang'an wanted to use it as the production base for its Chang'an PSA DS brand. Ford eventually won the struggle but I believe Ford is hesitant to further engage with Chang'an on EVs because it will put all the eggs in one basket like GM is doing with SAIC (and essentially given SAIC full access to all of its technology).

 

In order for Ford to expand its business in China, it has to link up with another major car company (bigger than Jiangling), AND it has to be a plant that manufacturers EVs to get Chinese Govt approval.

 

This is how Zoyte enters the picture. It is much bigger than Jiangling but not one of the Big 6 state owned car company. It will give Ford much more leverage in dealing with Zoyte on technology transfer (because Ford's non-EV business is not subject to hostage negotiation like SAIC-GM relationship), and since Ford is Zoyte's only foreign partner, it is in theory more likely to invest in the future of this business than Chang'an, which is looking to build its own EV business as well as Chang'an PSA's EV initiatives.

[Bob Rosadini]

Also what is Ford's China connection with respect to heavy trucks?

[jpd80]

 

You don't setup a new JV and $800 million plant to build a compliance vehicle. China is the largest EV market and the demand is real.

 

But the impetus here is that the Chinese Govt will only allow new foreign car company JVs if it is focused on EV. Ford is already maxed out with 2 existing JV, and one of them (Jiangling) is really small - basically, Ford choose its partners badly at the beginning... so it must now think outside the box to continue bulking up in China. Ford's main JV partner in China is Chang'an but Chang'an is very aggressive in growing its own business and it has been slow in investing with Ford on new plants to add capacity for Chang'an Ford. For example, the new Focus plant in Northeast China was part of a lengthy negotiation with Chang'an because Chang'an wanted to use it as the production base for its Chang'an PSA DS brand. Ford eventually won the struggle but I believe Ford is hesitant to further engage with Chang'an on EVs because it will put all the eggs in one basket like GM is doing with SAIC (and essentially given SAIC full access to all of its technology).

 

In order for Ford to expand its business in China, it has to link up with another major car company (bigger than Jiangling), AND it has to be a plant that manufacturers EVs to get Chinese Govt approval.

 

This is how Zoyte enters the picture. It is much bigger than Jiangling but not one of the Big 6 state owned car company. It will give Ford much more leverage in dealing with Zoyte on technology transfer (because Ford's non-EV business is not subject to hostage negotiation like SAIC-GM relationship), and since Ford is Zoyte's only foreign partner, it is in theory more likely to invest in the future of this business than Chang'an, which is looking to build its own EV business as well as Chang'an PSA's EV initiatives.

$800 million for an EV plant is relatively nothing compared to what Tesla is bucketing into mass producing an EV.

[jasonj80]

$800 million for an EV plant is relatively nothing compared to what Tesla Ponzi Scheme Investors is bucketing into mass producing an EV.

Fixed!

Edited November 10, 2017 by jasonj80

[bzcat]

Also what is Ford's China connection with respect to heavy trucks?

 

Ford controls JMC which is part of the Jiangling Ford joint venture.

[bzcat]

$800 million for an EV plant is relatively nothing compared to what Tesla is bucketing into mass producing an EV.

 

Tesla is spending money on building its own battery factories. The actual investment at Fremont auto production site is not that different from what Ford is spending in China.

[rmc523]

 

Ford controls JMC which is part of the Jiangling Ford joint venture.

 

Am I the only one that pronounces that name "Jing-a-ling" ?

[jpd80]

 

Tesla is spending money on building its own battery factories. The actual investment at Fremont auto production site is not that different from what Ford is spending in China.

Im saying that Ford is only doing this because of recent changes in Chinese legislation and the requirement to move in the direction of BEVs

That is compliance vehicles, there's no evidence that the broader market will accept these vehicles without government direction to do so.

[jasonj80]

Im saying that Ford is only doing this because of recent changes in Chinese legislation and the requirement to move in the direction of BEVs

That is compliance vehicles, there's no evidence that the broader market will accept these vehicles without government direction to do so.

Exactly to sell in China can me 2020 12% of sales much be electric, and it only goes up from there. The broader market will however accept them as they are all that will be available.

[jpd80]

Exactly to sell in China can me 2020 12% of sales much be electric, and it only goes up from there. The broader market will however accept them as they are all that will be available.

Correct, it's the largest BEV market because of Govt legislation and a captive audience of buyers being instructed to do so.

And given a choice,it's likely that number would be nowhere near as inflated as 12% of ICE sales.

Edited November 10, 2017 by jpd80

[atomcat68]

 

Am I the only one that pronounces that name "Jing-a-ling" ?

 

I say, "jangle ing"

[bzcat]

Im saying that Ford is only doing this because of recent changes in Chinese legislation and the requirement to move in the direction of BEVs

That is compliance vehicles, there's no evidence that the broader market will accept these vehicles without government direction to do so.

 

1. That's not what "compliance" vehicle mean. If Ford was aiming to sell a token amount of EVs with minimal efforts then you are right (like Focus EV in the US). But Ford is going all in on a new JV. That's by definition not merely trying to meet a Govt mandate with minimal effort. Besides, there is no Chinese Govt mandate for Ford to sell EVs.

2. I already explained that Ford is boxed in by the fact that it choose badly with its first JV partner (Jiangling) so the only way to for it to expand in China is via signing up a 3rd JV partner to build EVs. That's a growth strategy, not a compliance strategy. A compliance strategy will be to import EVs from the US or Europe and try to sell just enough thru Chang'an Ford to call it a day.

3. I think there is plenty of evidence the broader market will accept EVs. You are mistaking Govt policy for Govt mandate. The markets will be increasingly hospitable to EVs because of Govt policies that make it so. Demand will be growing because of the that. You won't find any serious auto executives besides Sergio who doesn't think electrification is the future. China is setting a regulatory environment that is encouraging EV adoption but that's no different than a number of other countries.

 

Govt policy is not the same as Govt mandate. Compliance strategy makes sense in response to a mandate. But it doesn't make any sense if you believe there is structural shift taking place. For example, the US Govt policies through the 1990s to 2000s favored SUVs over cars but there was no mandate from any US Govt agencies to sell SUVs. Overtime, the market demand adjusted and SUVs became more popular. Car companies that did not add SUVs to the line up (e.g. VW) saw their business wither in the US.

 

Policy can come in the form of mandate but more often it comes in the form of subsidy (direct or indirect) that influence the market (e.g. tax preference, industrial assistance and regulations). It is the stated Govt policy of virtually all important auto markets in the world to reduce CO2 emission and all of them have said vehicle emission is one of the primary target. Auto companies will be planning their own demise if they don't plan on more EVs.

Edited November 13, 2017 by bzcat

[jpd80]

 

1. That's not what "compliance" vehicle mean. If Ford was aiming to sell a token amount of EVs with minimal efforts then you are right (like Focus EV in the US). But Ford is going all in on a new JV. That's by definition not merely trying to meet a Govt mandate with minimal effort. Besides, there is no Chinese Govt mandate for Ford to sell EVs.

yes there is as of next year.and increasing beyond 2020, importing EVS and PHEVs them adds steeply to their cost

and ultimately sales numbers is of way more importance to Ford for compliance.

 

 

2. I already explained that Ford is boxed in by the fact that it choose badly with its first JV partner (Jiangling) so the only way to for it to expand in China is via signing up a 3rd JV partner to build EVs. That's a growth strategy, not a compliance strategy. A compliance strategy will be to import EVs from the US or Europe and try to sell just enough thru Chang'an Ford to call it a day.

The volume required for compliance almost mandates that they be built locally in order to attract sufficient buyers.

Importation adds cost via govt taxes which adds pressure to sales that need to happen for compliance.

(sorry, repeating myself)

 

3. I think there is plenty of evidence the broader market will accept EVs. You are mistaking Govt policy for Govt mandate. The markets will be increasingly hospitable to EVs because of Govt policies that make it so. Demand will be growing because of the that. You won't find any serious auto executives besides Sergio who doesn't think electrification is the future.

 

Govt policy is not the same as Govt mandate. Compliance strategy makes sense in response to a mandate. But it doesn't make any sense if you believe there is structural shift taking place.

 

Policy can come in the form of mandate but more often it comes in the form of subsidy (direct or indirect) that influence the market. It is the stated Govt policy of virtually all important auto markets in the world to reduce CO2 emission and all of them have said vehicle emission is one of the primary target. Auto companies will be planning their own demise if they don't plan on electrification.

In China, Govt policy is an approximation of Govt mandate in a communist regime

It is none the less social engineering and what the government encourages manufacturers to do will also be

encouraging buyers to purchase by simply making available in sufficient quantities to drive down costs.

 

You're not living in a location where market forces drive evolution to electric vehicles at a fast enough rate to suit the Government,

so to suggest that buyers will take up electric vehicles of their own volition may happen to a degree but the government obviously

wants way more change than the natural rate of conversion and the moment you cross that line, you're using compliance vehicles

to get there.

 

Summing up,

By Compliance vehicle, I mean any EV or PHEV that is required to be sold in sufficient volume

to meet the statutory requirements of government legislation. Importation of vehicles to meet

that obligation adds more cost via tax which then dicourages their purchase compared to

other locally manufactured EVs and PHEVs.and that's something Ford can't leave to chance.

Edited November 13, 2017 by jpd80