Al Root

Ford Motor might be considering helping Chinese auto makers establish a beachhead in the lucrative American car market. It sounds like a bad idea.

Investors don't have much to worry about -- yet. Still, understanding what's likely to happen can help them avoid any portfolio mistakes.

Over the weekend, Bloomberg reported that Ford and the White House discussed Chinese automotive partnerships. Ideas were pretty vague and included joint ventures majority-owned by Americans producing, presumably, Chinese-designed cars domestically.

The question that Barclays analyst Dan Levy pondered on Tuesday was, of course, why? Currently, Chinese auto makers are pressuring Europe with imports. They haven't entered the U.S. partly because of stiff import tariffs. Why invite new competition?

There isn't a great reason, but auto executives often talk about partnerships. They are littered throughout history. Ford and Volkswagen, for instance, had an agreement to share platforms. That kind of deal can cut the cost of developing new, hopefully high-volume cars, making it a win-win for both firms.

China's car industry was partly built on partnerships. General Motors and SAIC formed a venture before the turn of the century. By 2014, it was producing some $2 billion in net income for GM.

Things didn't stay that good. Profit declines culminated in a 2024 $4.4 billion loss, which included asset impairments. The Chinese market simply got more competitive, and local buyers pivoted toward local brands, often with electrified platforms. Plug-in hybrids and all-electric cars are expected to account for about 60% of new vehicle sales in China this year.

The Chinese car business remains brutal. More than a dozen auto makers with $400 billion-plus in combined annual sales posted an average operating profit margin of 2% in 2025, according to Bloomberg. GM essentially earned more than the entire Chinese industry this past year.

In a future partnership, the U.S. could learn to produce lower-cost EVs from the Chinese, who would get access to the U.S. market.

Something similar has happened before. General Motors and Toyota built what is now Tesla's Fremont, California, plant in the 1980s. GM wanted to learn about lean manufacturing, and Toyota was building its domestic manufacturing footprint. GM undoubtedly learned from Toyota, which, four decades on, rivals GM as the largest seller of cars in America.

For investors, the idea of Chinese partnerships qualifies as a watch item. They would take years to formulate and years longer to impact profits. It took GM roughly 15 years to earn substantial profits from its Chinese joint venture, which didn't last.

China would also likely enter the U.S. market in a niche. Americans don't buy a lot of battery-powered cars. U.S. all-electric sales are expected to decline in 2026 to about 5% of 2026 new car sales after the September expiration of the $7,500 federal EV purchase tax credit.

Ford stock took the idea of partnerships in stride on Tuesday, rising 0.1% to $14.13. The S&P 500 and Dow Jones Industrial Average both added about 0.1%.

Through Tuesday trading, Ford stock was up 49% over the past 12 months, leaving shares trading for about nine times estimated 2026 earnings.

Competition and threats of new competition are two reasons car stocks tend to have single-digit price-to-earnings ratios.

Write to Al Root at allen.root@dowjones.com

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February 17, 2026 17:55 ET (22:55 GMT)

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