Ford Motor Co. has ended its joint venture electric vehicle plans with China’s Zotye, a company with financial troubles so severe that it’s fighting for survival.
The Ford development, first reported late Wednesday by Reuters in Shanghai, does not change the automaker’s commitment to producing vehicles for the largest electric vehicle market in the world, spokesman T.R. Reid told the Free Press.
“If anything, our intentions are greater and more ambitious today than they were three or four years ago,” he said. “We will fulfill them in a different way.”
The agreements with Zotye (pronounced ZOH-tie) were signed in 2017 for battery-electric vehicle development and in 2018 for smart mobility.
“The world is a very different place from just 12 months ago,” Reid said. “Not just because of the pandemic. Everybody is talking about electric vehicles more frequently, more loudly, more urgently than even a short time ago. So, the circumstances and what made sense as relatively recently as 2017 seem like forever ago.”
But it’s not because Ford’s interest in the technology or implications of electric vehicle development have diminished, Reid said. “Quite the opposite.”
Ford announced terminating its agreement with Mahindra in India in December, and there are similarities.
“We entered agreements to develop joint ventures but never actually formed the joint ventures,” Reid said. “This is sort of like our situation with Mahindra, where we announced an agreement to pursue a joint venture, but when we terminated the agreement with Mahindra in December, we hadn’t actually formed a joint venture. Nor had we started either technologies — battery-electric vehicles or smart mobility — with Zotye.”
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Ford’s ambitions involving electric vehicles overall and specifically in China “are higher than ever,” Reid said. “This is not ending a joint venture. This is not going forward with creating one. We are not signaling stepping back.”
Zotye did not respond to news media inquires about Ford.
Changes in China
In the last few years, China has softened its joint venture requirement for automobile production, said Sam Fiorani, vice president of global vehicle forecasting at Auto Forecast Solutions based in Chester Springs, Pennsylvania.
“Today, a foreign company no longer needs a partner to build electric vehicles in China, removing one reason to start working with Zotye,” he told the Free Press. “Additionally, Zotye is in deep financial trouble, requiring state intervention to continue.”
Meanwhile, Ford plans to move forward with its joint venture with Changan, allowing the Dearborn carmaker to produce the already-developed Mustang Mach-E in the country quickly and with little additional investment.
‘Cusp of collapse’
Ford cut loose from a company on life support, according to news media reports.
Zoyte “struggles to survive” and is “on the cusp of collapse,” reported Caixin Global, a Beijing-based Chinese media organization, in June.
The headline of the story: “From Ford Partner to Dying Electric-Vehicle Maker.”
Its portrayal of lost potential with Ford was grim, after Zotye had made global headlines in 2017 for its new energy vehicle partner in China.
“Zotye’s woes have many of their own special characteristics, including poor accounting and internal control practices that led its auditor, Baker Tilly China, to publish a “disclaimer of opinion” … due to its inability to evaluate the company’s financial statements,” reported Caixin Global. “But the company’s troubles are also part of a broader industry shakeup now gripping China’s NEV sector, which feasted for years on strong government support, only to lose much of it over the last two years.”
Trump in China
During a visit by then-President Donald Trump to China in 2017, Ford and Zotye officials said they would invest a combined $756 million to set up a 50-50 joint venture in China to build small electric passenger vehicles, Reuters reported
In 2018, Ford announced signing a memorandum of understanding for another venture that would make electric vehicles for ride-hailing fleets.
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“According to Boston Consulting Group, the local ‘e-hailing’ market is expected to grow by 19% annually through 2022, with an overall fleet size potentially reaching up to 26 million,” Ford said at the time.
Global automakers, including Ford and General Motors, have said they value their operations in China and seek to expand manufacturing capacity. China, like California, is using government incentives and restrictions to increase the adoption of electric vehicles. Their lower emissions are seen as critical to improving air quality.
Mach-E in China
Ford announced Jan. 27 that its Mustang Mach-E SUV will be manufactured by Changan Ford for customers in China.
In a statement to Reuters, Ford said it would “pursue a more flexible business model in China” that would see it utilize its existing operations in the country and elsewhere, and build related business centers.”
Things are more fluid now than ever in China, said Joe McCabe, president of Auto Forecast Solutions.
“In the infancy of the electrification push, lots of players were looking to carve out a niche for themselves for long-term success. Now, as this market is maturing and trying to take shape, investments need to be more strategic,” he said. “We will start seeing some smaller players with minimal resources and limited global reach start to fade away in favor of larger, established organizations.”
Zotye has been looking for partners and distributors to push their product, McCabe said. However, they assemble far fewer vehicles than Changan Ford.
“The Changan Ford partnership has been well established for many years, with historical production and capacity nearly reaching 1 million units of Ford, Lincoln, and Volvo products,” he said. “The current model of hundreds of global EV players is unsustainable. Countries like China, who want to claim electrification dominance, will subsidize the players they deem to be the winners in this space, leaving the smaller players in the dust.”
Contact Phoebe Wall Howard: 313-222-6512 orphoward@freepress.com.Follow her on Twitter@phoebesaid. Read more on Ford and sign up for our autos newsletter.