Ford CEO says China main EV rival, not GM, Toyota

May 25 (Reuters) – Ford Motor Co (F.N) CEO Jim Farley said on Thursday Chinese electric vehicle makers are its main rivals in the sector, but the company has hurdles competing on cost at a smaller scale.

“I think we see the Chinese as the main competitor, not GM (GM.N) or Toyota (7203.T),” Farley said at the Morgan Stanley Sustainable Finance Summit. “The Chinese are going to be the powerhouse.”

China, the world’s largest auto market, has some of the best battery technology and dominates EV production, Farley said. He cited BYD (002594.SZ), Geely (0175.HK), Great Wall, Changan (000625.SZ) SAIC as among the “winners” among Chinese automakers.

To beat Chinese automakers, Farley said Ford needs distinctive branding, which he believes it has, or lower costs. “But how do you beat on them on cost if their scale is five times yours?” Farley said. “The Europeans let (Chinese automakers) in – so now they are selling in high volume in Europe.”

Ford said in February it would invest $3.5 billion to build an electric vehicle battery plant in Michigan using technology from Chinese partner CATL (300750.SZ) to produce lower-cost batteries.

The U.S. Treasury must still issue rules later this year that will determine whether the Ford SAIC arrangement violates a prohibition on “Foreign Entities of Concern” that is part of a $7,500 EV tax credit. Ford has faced criticism from Senator Marco Rubio for the plan.

“We have a decision to make here in the US,” Farley said. “If battery localizing their technology in the US gets caught up in politics – you know the customer is really going to get screwed.”

General Motors CEO Mary Barra this week made her first visit to China since the start of the pandemic, as GM struggles with a sales slump there.

Ford is cutting costs in China where its sales have been sliding since 2016. It is restructuring operations there to turn one of its joint ventures into an export hub for low-cost commercial electric and combustion vehicles.

In January, Tesla CEO Elon Musk said of Chinese automakers: They work the hardest and they work the smartest. … And so we guess, there is probably some company out of China as the most likely to be second to Tesla.”

Reporting by David Shepardson; Editing by Richard Chang