Is Ford Planning a Bolder Move Into Electric Cars?

Ford Motor Company (NYSE: F) said it's ramping up its electric-car program in China, a hint that it may be preparing a more aggressive global push toward electrified vehicles under its new CEO.

The Blue Oval said on Tuesday that it has entered into a "memorandum of understanding" with privately held Chinese automaker Anhui Zotye Automobile. Ford and Zotye Auto (as it's known) are working to set up a joint venture to produce electric vehicles in China under a new brand. 

It's one in a series of recent signs that Ford's new CEO, Jim Hackett, may be preparing to step up the company's commitment to electric cars and other advanced technologies. Here's what we know.

Jin Zheyong, CEO of Chinese automaker Anhui Zotye Automobile Co., Ltd., with Ford's Asia Pacific chief, Peter Fleet. Ford and Zotye Auto announced plans to form a joint venture to make electric vehicles in China. Image source: Ford Motor Company.

What Ford said about the deal with Zotye

In a statement, Ford said its plan with Zotye Auto is to "explore the establishment of a joint venture for the development, production, marketing and servicing of a new line of all-electric passenger vehicles in China." 

Put another way, Ford and Zotye are currently planning to work together, but they will need to get official permission to do so. Global automakers are required to enter into joint ventures with Chinese automakers in order to get permission to manufacture vehicles in China. The process of setting up a joint venture requires regulatory approvals from the Chinese government. It generally takes several months to complete. 

Ford said the vehicles that would be produced by this joint venture would be sold under a new China-only brand and would "aim to capture a sizable share of China's all-electric passenger vehicle market."

Peter Fleet, the Ford executive who leads its Asia Pacific business unit, said that electric vehicles represent a significant growth opportunity in China:

The potential to launch a new line of all-electric vehicles in the world's largest auto market is an exciting next step for Ford in China. Electric vehicles will be a big part of the future in China, and Ford wants to lead in delivering great solutions to customers.

Before the deal with Ford, Zotye was probably best-known in the West for its SR9, a near-clone of the Porsche Macan SUV. Image source: Anhui Zotye Automobile Co., Ltd.

Who is Zotye Auto?

Zotye is a small, privately held automaker headquartered in Huangshan City, about 400 kilometers southwest of Shanghai. It's a small automaker, with about 323,000 vehicles sold in 2016, according to JATO Dynamics. (For comparison, Ford shipped about 6.7 million vehicles last year.)  

Zotye isn't particularly well-known outside of China, though its SR9 SUV has won some notoriety for its very (very) strong resemblance to the much more expensive Porsche Macan. But in addition to its SUVs (which don't all look like Porsches), it has had some recent success with electric vehicles. Zotye's E200, a two-seat electric vehicle that somewhat resembles the tiny Smart Fortwo, has become a relatively common sight in Beijing, where internal-combustion vehicles are restricted due to a severe smog problem.

Zotye's E200, shown here in an image from Zotye's website, is an all-electric two-seat urban commuter car. Image source: Anhui Zotye Automobile Co., Ltd.

Ford's statement characterized Zotye as an electric-vehicle "pioneer" and said that it's the market leader in China's "all-electric small vehicle segment," with more than 16,000 electric vehicles sold this year through July.

What this deal suggests about Ford's new direction

Hackett, who took Ford's top job in May, has said that he will use his first 100 days to "review" Ford's business before presenting a revamped business plan for the company this fall. 

Before becoming CEO, Hackett had been running Ford Smart Mobility, its subsidiary charged with developing new technology-enabled mobility businesses, leading many to expect that he would push Ford to move more aggressively with technologies like electric-vehicle drivetrains and self-driving systems.

Image source: Ford Motor Company.

There have been several signs recently that such a push may be underway. Ford executives have hinted that the company's plan to build a self-driving vehicle in 2021 may be expanded to include a commercial-vehicle offering (to move packages instead of people), and that Ford is rethinking its broader strategy around the deployment of self-driving technology. 

The deal with Zotye suggests that Hackett and Ford's senior leadership team are also thinking hard about how the company wants to roll out electric vehicles, and not only in China. Ford has said that it will launch a long-range electric SUV in the U.S. in 2020, and that it has committed $4.5 billion to "electrified vehicles" (including hybrids as well as fully electric models), but its efforts under former CEO Mark Fields were seen as lagging those of some global rivals, including General Motors (NYSE: GM), Nissan (NASDAQOTH: NSANY), and Volkswagen AG (NASDAQOTH: VLKAY).  

The takeaway: Don't be surprised if Ford follows up this announcement by announcing expanded plans for electric vehicles in Europe and the United States as well. 

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David Gardner owns shares of Ford. John Rosevear owns shares of Ford and General Motors. Tom Gardner has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Ford. The Motley Fool has a disclosure policy.

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