Ford CEO Says Chinese EV Makers 'Incredibly Undervalued,' Expects A 'Shakeout' Soon

Ford Motor Co F CEO Jim Farley said on Wednesday that Chinese electric vehicle firms are “incredibly undervalued” and that he expects them to become more important in the future.

What Happened: Farley, who has been steering Ford's transition to EVs, said he expects to see "big changes” in the highly competitive space. 

“I would say new EV companies probably will get simpler. And Chinese [firms] will become more important,” Farley said at the Alliance Bernstein 38th Annual Strategic Decisions Conference.

The 60-year executive believes a host of EV companies are going after markets not big enough to justify the capital they're spending or their valuations. But he differed on Chinese companies.

“The China EV makers ... if you look at $25,000 bill material for an EV in China, it's probably the best in the world. And I think they are incredibly undervalued,” Farley said. 

“And they haven't had or shown any interest in exporting other than Norway ... there is a shakeout coming. And I feel like that is going to favor many of the new Chinese players.”

Farley said he expects consolidation among old automakers, and many smaller players would struggle. 

U.S.-listed Chinese EV makers such as Nio Inc NIO, Xpeng Inc XPEV, BYD Co BYDDY and Li Auto Inc LI have been quicker with their launches than legacy rivals. Warren Buffett-backed BYD also sells EVs at or below $25,000.

See Also: Ford Emphasizes Tesla-Like Strategy, Says Online Sales To Be A 'Bigger Part' Of Its Future

Farley said some new players would face capital constraints that will make them better.

“EV startups will be forced to solve top problems like Tesla Inc TSLA did.”

Price Action: Ford shares closed 0.95% lower at $13.55 on Wednesday and are down 38% this year.