U.S. officials are very interested in making sure Chinese automotive technology stays out of the U.S., for some very good reasons. That overarching policy goal has created some heat for one of the most American car companies: Ford Motor.
Tuesday afternoon, Transportation Secretary Sean Duffy posted a letter to Ford CEO Jim Farley expressing "profound concern" about the company's use of Chinese technology. The letter takes aim at Ford's licensing of Chinese battery technology and joint venture with Chinese auto maker Geely in Europe. The joint venture could help the Chinese car industry "secure a vital foothold in Western markets," wrote he Secretary. "And the Company's ongoing talks with BYD for hybrid vehicle components could lead to further embedding subsidized foreign technology into Ford's core supply chains."
Ford posted a response online challenging how some of Duffy's concerns were framed. "Ford is the most American auto maker," the company said, adding it assembles more vehicles and employs the most hourly workers of any auto maker in the country.
Ford stock dropped 4.2% on Tuesday, but essentially all of that decline came before the letter. Higher oil prices weighed on investor sentiment. General Motors stock fell 2.2% on Tuesday.
Ford stock was unchanged in early trading on Wednesday, while S&P 500 futures were down 0.3%. Investors don't seem to be treating the letter as an acute crisis. The Chinese auto industry, however, is a chronic problem investors should watch.
Brutal competition, overcapacity, and dwindling government support for electric vehicles have led to weak domestic automotive profitability. It has also led Chinese car companies to look to overseas markets for growth, impacting profits at European car companies. Ford's agreement with Geely, announced in July, is one way Ford plans to compete in Europe.
So far, the U.S. market has been insulated from Chinese woes, mainly by stiff tariffs on imported vehicles. The U.S. also bans certain Chinese technology, which has effectively shut EV maker Polestar out of the market, despite some of its vehicles being assembled in America.
The policy has had its perks. Just look at the stock prices. Coming into Wednesday trading, Ford stock was up 22% over the past 12 months. Shares of Chinese EV maker BYD were down 23%. Shares of SAIC Motor were off 42%. Shares of Mercedes-Benz Group and Volkswagen were off 10% and 22%, respectively.
Of course, the policy is effectively insulating U.S. auto makers from the rest of the world. That, however, has been a good thing lately.
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