Ford Motor Company (NYSE: F) investors can't seem to catch a break. The company faces numerous challenges in improving vehicle quality (it's led the U.S. industry in recalls for three straight years), increasing electric vehicle competition and price wars, emerging well-built Chinese EVs, and now a Japanese alliance among automakers hoping to advance their position in the global EV market. Let's dive into what's happening and how Ford plans to respond to the new challenge.
What's going on?
Most investors have rightly turned their focus to emerging Chinese companies that are well-kfunded, produce well-built EVs, and are planning to expand globally. Global automakers and governments are taking the Chinese EV ambition very seriously, with Europe introducing stiff tariffs to help protect domestic automakers while they work on bringing price and costs down to a more competitive level.
The United States is also considering tariffs, though depending on upcoming policy adjustments and potential presidential election ramifications, it's possible Chinese EV makers could produce vehicles in Mexico to avoid tariffs sooner, rather than later. But there's now a new threat, and it comes in the form of a recent Japanese automaker alliance.
Japanese alliance
Nissan, Honda (NYSE: HMC), and soon Mitsubishi Motors are creating an alliance focused on bringing to market next-generation EVs with improved software in an attempt to challenge rivals Tesla and new low-cost challengers from China. Keep in mind that as things currently stand, U.S. EVs cost on average about double that of their Chinese counterparts, thanks in part to the latter's government subsidies. Further, China accounted for nearly 62% of the 10.4 million battery-powered EVs that were produced globally in 2023.
More specifically, Nissan and Honda will research a joint software operating system in the near term with the goal of putting it into mass production after 2027 -- so there's some time for Ford to respond. The Japanese alliance will immediately begin working on electric motors and inverters before moving to e-Axles, and the long-term goal by the end of the decade is to develop common specs for EV batteries so the products can be interchangeable among the companies' brands.
The Japanese automakers are already studying how to manage supplies between companies and have reached an agreement on what models to jointly supply in specific regions, which will help drive increased scale and split/lower cost burdens.
"If companies cannot cope with the circumstances, they will not survive," Honda CEO Toshihiro Mibe said, according to Autonews. "We have to make the move right now or we won't be able to catch up. ... This cooperation between the three will be a strong weapon," Mibe added.