Ford CEO says American carmakers are battling a perfect storm

Automakers face three “perfect storm moments” that could be existential, said Ford CEO Jim Farley, leader of the 122-year-old company that democratized cars for ordinary Americans.

Farley took over as CEO in 2020 but has been with the automaker since 2007. Before that, he spent nearly 20 years at the company. toyota.

Now, he said, the three-fold transformation happening to automakers represents a “come to Jesus” moment for the industry, and they will have to either face each of the challenges or face the consequences. Rolling stone.

The first threat is Chinese automakers. Farley said that as recently as 2022, Western companies will dominate the automobile market in the world’s second largest economy. However, in 2023, Chinese automakers surpassed their Western rivals’ Chinese car sales for the first time. Wall Street Magazine reported.

volkswagen It was the biggest player in the market for a decade. The German automaker sold large quantities 4.23 million units in 2019but the market’s growing preference for EVs and domestic options has led to steady declines, reducing VW’s sales by approximately 36%. 2.69 million in 2025.

Ford also saw its own declines in China; sales have fallen from a peak of 853,000 in 2016 to 288,000 in 2022.

Farley knows firsthand the capabilities of the Chinese auto industry. In 2024, he spent six months driving. Xiaomi SU7, the first EV created by the Chinese technology company known for its smartphones and I didn’t want to give up.

China’s automakers have been successful in part because of: controversial government subsidieshe said, but also because of its engineering excellence.

“Besides those with the most subsidies from the government, they also have OEMs [original equipment manufacturers] “They’re really good,” he said. Rolling stone.

Following success at home, some of China’s largest automakers are expanding globally. BYD Last year it surpassed Ford in global sales; it sold only electric vehicles and hybrids.

Second, auto companies face a more complex challenge, thanks in part to the rise of electric vehicles and a shift in engineering toward “software-defined vehicles,” according to Farley.

“Safety, driver assistance and vehicle control systems are very complex, and there is a lot of software in vehicles with sensing devices,” he said.

These vehicles are much more complex and expensive to build than conventional vehicles, and they require different expertise than automakers have traditionally used to produce their vehicles.

An example of this challenge is the electric pickup truck F-150 Lightning produced by Ford. stopped in December after just three years in production. Part of the problem with the vehicle was that the company took a traditional approach to producing electric vehicles rather than resetting its approach.

“It didn’t take us long to learn that our bias against internal combustion engines was so high that we weren’t actually designing cars correctly,” he said. Rolling stone.

Meanwhile, with the all-electric Mustang Mach E Tesla’s The Model Y was 70 pounds heavier than the Mustang because Ford had approached internal wiring in a more traditional manner.

He added that Elon Musk’s automaker is considering designing its vehicle differently.

“They said, ‘Let’s design the vehicle for the lowest, smallest battery.’ It’s a completely different approach,” he said.

The third and potentially biggest storm is the regulatory hit that accompanies the march toward lower carbon emissions, Farley said.

“Everyone thought the first shot, or the second and third shot, would be all-electric vehicles,” Farley said.

Instead, expensive batteries and the Trump administration’s weakening of emissions standards have changed the calculus. In December 2025, Trump reduced the mandatory annual improvement of automakers’ emissions to 0.5% annually from the Biden administration’s 2% Declining steadily to 0.25% in 2031.

The National Highway Safety Administration predicted this move would reduce average miles per gallon for light-duty vehicles. 34.5 miles per gallon From the 50.4 miles per gallon average that could be achieved by 2031 under Biden-era standards.

“What this really means is that if there is no regulation, each OEM will fall back on their own cultural norms,” Farley said.

But Ford is hedging its bets. If emissions standards may change under Trump, they are likely to change under the next president.

That’s why Ford moved away from the plug-in EV business and scrapped the F-150 Lightning in December. The company is betting its future on hybrids, extended-range EVs (EREVs) and a smaller, affordable EV platform.

“If we don’t put our chips in the right number and the right color, Ford may not exist,” he said.

This story first appeared on: Fortune.com