There is an English phrase called "aha moment," commonly referred to as a moment of sudden realization.
It was coined by the German psychologist and phenomenologist Karl Bühler over a century ago. After experiencing failures or deep contemplation, people often have sudden and profound insights, which are known as "aha moments."
Jim Farley, CEO of Ford
Jim Farley, 62, the global CEO of Ford, the second-largest automaker in the U.S., has experienced many such "aha moments" in the past eighteen months.
According to The Wall Street Journal, Farley and other Ford executives conducted a series of visits to China during this period, where they realized that the electric vehicle revolution in China is rapidly reshaping the global automotive market at a pace few anticipated, and that Chinese automakers are leading the charge in electric vehicle competition.
A few days ago, The Wall Street Journal published an article titled “What Scared Ford’s CEO in China.” This report detailed Farley and his team’s thoughts after visiting the Chinese market.
“They are ahead of us”
In early 2023, after China lifted pandemic restrictions and reopened, Farley and other Ford executives visited the Chinese market for the first time since he became CEO three years ago. He took the helm of Ford, a company with a 120-year history, in October 2020. In 2021, under his leadership, Ford announced its global strategy, the Ford+ plan, which aims to restructure Ford’s automotive business into three major divisions: Ford Blue, Ford Model e, and Ford Pro.
The Wall Street Journal reported that Farley, a racing enthusiast with a wealth of automotive knowledge, is used to driving performance vehicles. However, this time, he test drove a Changan electric SUV with Ford CFO John Lawler in the passenger seat. After the test drive, Lawler turned to Farley and said, “Jim, this is different; these people are ahead of us.”
The report revealed that Ford executives were shocked by the progress made by Changan, noting that the electric SUV provided a smooth, quiet ride with a luxurious interior and impressive technology.
2023 marks the third year since Ford's flagship product, the Mustang Mach-E, was launched in China. As Ford’s first all-electric SUV model, the Mach-E has struggled to gain traction in the Chinese market, with annual sales of just 2,062 units in 2023. During this time, the Mach-E has seen price cuts and model changes. Up until now in 2024, the cumulative sales of the Mach-E amount to 795 vehicles.
The Wall Street Journal indicated that the test drive in early 2023 led Farley and Lawler to abandon attempts to reclaim Ford's leadership position in China, choosing instead to primarily utilize China as a base for exporting vehicles to other markets.
In December 2023, Ford China officially announced, “As of 2023, Ford China’s total vehicle export volume has officially surpassed 100,000 units. This is a historic achievement for Ford China in exporting vehicles from mainland China to overseas markets.”
“Meeting Chinese standards is the top priority”
The Wall Street Journal reported that after recently returning from China, Farley expressed his anxiety during a call with board member John Thornton following his market visit in May.
“In just a few years, Chinese electric vehicle manufacturers like BYD, supported by Buffett, and other domestic brands have snatched a significant market share from previously dominant foreign competitors through low prices, smarter configurations, and rapid updates. Now, they are rapidly expanding into Europe, the Middle East, and other Asian markets.”
Reports indicate that shortly after concluding their visit, Farley arranged for multiple Chinese electric vehicle brands, including Xiaomi and Li Auto, to be shipped to the headquarters in Michigan for company leadership to experience. Ford insiders were astonished by the diverse functions of Chinese electric vehicles.
“One vehicle was Xiaomi’s first electric car (jokingly dubbed the 'people's Porsche'), priced between $30,000 and $40,000, lower than the Ford Mustang. The Xiaomi car features an aroma diffuser and an infotainment system, with a smart connectivity function enabling it to integrate with smart home devices, allowing remote control of home items like lights or air conditioning through the vehicle’s infotainment system.”
The report quotes Farley stating, “Meeting Chinese standards is the most important priority.” He also noted that, “Farley believes that Chinese electric vehicles pose a direct threat to European and other overseas markets and represent a long-term risk for Ford’s profit growth in North America, regardless of government trade protections.”
When Ford introduced the Mustang Mach-E to the Chinese market in 2021, Farley had indicated, “In the future, Ford's focus in China will be on the new premium vehicle market and the luxury vehicle market.” Following this visit, Farley emphasized that Ford will concentrate on small electric vehicles in China, while larger pickups and SUVs will continue to serve as profitability engines in the form of traditional fuel vehicles.
Insights After Realization
The Wall Street Journal concluded the article by providing readers with an insight into who Jim Farley is.
Board members mentioned, “Farley is not a flashy speaker, nor is he a typical CEO. He won’t trust you until you earn his trust.”
“Farley also does not believe in any market research; he prefers to observe for himself what people are doing and where they are spending their money.”
“Farley is a devoted fan of Steve Jobs. He says that his favorite picture of Jobs is one from the 1980s, showing Jobs squatting on the floor of an office, watching an employee operate a Macintosh computer. Before taking the reins at Ford, Farley had marketing experience at Toyota, where he spent a year conducting national market research for the new Camry, even chatting with car owners in mall parking lots.”
In the past eighteen months, he has simply been doing what he has always believed in—personally observing the market and using that as a guide to adjust the course of the vast ship that is Ford.
The board added, “Farley’s honesty sometimes offends people.” Farley once stated that if he could have any superpower, it would be kindness; he wishes to be kinder.
However, Farley is just an ordinary person. Yet compared to the average individual, Farley is quite exceptional, as not many can shoulder the weight of leadership. A businessman without superpowers, Farley currently focuses on resolving one key issue: profitability. Generating profit is his top priority.
Ford’s report reveals that in the first quarter of this year, Ford sold a total of 10,000 electric vehicles, with operating losses soaring to $1.3 billion, averaging a loss of $132,000 for each electric vehicle sold, dragging down the overall profitability of the company. Due to ongoing pricing pressures and investments in the next generation of electric vehicles, Farley anticipates that Ford’s electric vehicle division will incur losses of $5 billion to $5.5 billion for the entirety of 2024.
