Ford CEO Jim Farley is looking to China, not Tesla, when evaluating competitive benchmarks. He is now exploring ways for the traditional automaker to emulate its Chinese counterparts.

In 2024, Farley spent six months test-driving the Xiaomi SU7, the first electric vehicle from the Chinese tech company famous for its smartphones. At the end of the trial period, Farley stated, "I didn't even want to give it back."

During a podcast last Friday, Farley explained his choice to drive the Xiaomi SU7 over a vehicle from an American company like Tesla. "I'm not picking on Tesla. They've been doing a great job, but you know, they really don't have a next-generation product," Farley told host Bob Safian.

In response to intensifying Chinese competition, Tesla has redesigned and upgraded some of its models. The 2026 Model Y features a more futuristic exterior and interior upgrades, including a redesigned dashboard. The 2023 Model 3 also received a comprehensive refresh, adding ventilated front seats and ambient lighting. However, some critics consider these updates minor compared to improvements made by Chinese automakers.

Farley believes that for Ford to become the best globally, it must focus on overseas rivals, including not only Xiaomi but also Chinese EV leader BYD. He described BYD as "the best in the world" in terms of cost, supply chain, manufacturing, and intellectual property.

While Chinese electric vehicles are currently unavailable in the US market, they are gaining traction elsewhere. BYD's sales in Europe reportedly surged nearly threefold to 18,242 vehicles in January, up from 6,884 units during the same period last year.

Farley expressed his hope that Ford could emulate BYD's approach while leveraging American strengths: "using innovation to compete with the best in the world."

With Chinese EVs being both affordable and technologically advanced, even Tesla CEO Elon Musk acknowledged in 2024 that Chinese automakers are "the most competitive car companies in the world."

Farley suggested Ford should learn from BYD to build vehicles meeting the needs of America's "next wave" of car buyers. These consumers desire multiple body style options but at prices around $30,000, not $50,000.

"If we're smart, we'll take BYD's cost advantage and then use a BYD platform to compete in segments where we know the customer really well," he said.

Ford's most affordable model is the Maverick XL hybrid pickup, starting at approximately $28,000. Tesla's entry-level Model 3 sedan starts just under $37,000. Both base models are significantly more expensive than BYD's compact electric hatchback, the Seagull, which is priced around $9,500 but is only available in the Chinese domestic market, with higher prices in overseas markets including Latin America and Europe.

To address this competition, Ford has already begun its transformation. In December, due to lower-than-expected demand following the cancellation of EV subsidies, Ford adjusted its electric vehicle strategy and recorded a $19.5 billion charge, one of the largest losses in corporate history.

Ford is now focusing on hybrid vehicles and so-called extended-range electric vehicles (EREVs), which feature a small internal combustion engine primarily used as a generator to charge the battery for extended driving range. The Ford F-150 Lightning, once heralded as the future of Ford's EV business, will be redesigned as an EREV.

However, Ford has not abandoned electric vehicles entirely. By 2027, the company still plans to produce a $30,000 electric pickup, which would be the first model in a new category of low-cost EVs. In contrast, the Ford F-150 Lightning starts at $54,780.

Farley has consistently been a vocal advocate for American automakers to learn from China, having previously stated that Ford considers Chinese manufacturers, not General Motors or Toyota, to be its primary competitors.