Ford CEO Jim Farley is the leader of the 122-year-old company that democratized automobiles for ordinary Americans. He said automakers are facing three “perfect storm moments” that could affect their survival.
Farley took over as CEO in 2020 but has been with the automaker since 2007. Prior to that, he worked at Toyota for nearly 20 years.
Now, he believes the automaker’s triple transformation represents a “come to Jesus” moment for the industry, and they will have to rise to each challenge or face the consequences, he told us rolling stones.
The first threat is Chinese automakers. Farley said that as recently as 2022, Western companies dominated the car market in the world’s second-largest economy. But by 2023, Chinese automakers will sell more cars in China than their Western rivals for the first time wall street journal reported.
Volkswagen has been the largest player in the market for a decade. The German automaker sold a whopping 4.23 million vehicles in 2019, but the market’s growing preference for electric vehicles and domestic models has led to a steady decline in sales, causing Volkswagen’s sales in 2025 to fall by about 36% to 2.69 million vehicles.
Ford’s sales in China have also declined, with sales falling from a peak of 853,000 vehicles in 2016 to 288,000 in 2022.
Farley has first-hand knowledge of the capabilities of the Chinese auto industry. He spent six months in 2024 driving a Xiaomi SU7, the first electric car from the Chinese technology company best known for its smartphones, and he didn’t want to give it up.
He said Chinese automakers’ performance was partly due to controversial state subsidies but also due to engineering excellence.
“They receive the most subsidies from the government as well as from their OEMs [original equipment manufacturers] It’s really good,” he told Rolling Stone.
After success at home, some of China’s biggest automakers are expanding globally, with BYD outselling Ford globally last year but selling only electric and hybrid vehicles.
Second, Farley said car companies also face more complex challenges, driven in part by the rise of electric vehicles and the shift in engineering toward “software-defined cars.”
“The systems used for safety, driver assistance and control of vehicles are very complex and there is a lot of software in the vehicle that is a sensing device,” he said.
These vehicles are more complex and expensive to build than traditional vehicles, and they require a different set of expertise than what automakers have traditionally used to build vehicles.
One example of this struggle is Ford’s F-150 Lightning, an electric pickup truck that Ford discontinued in December after just three years in production. Part of the problem with this vehicle is that the company is approaching it the traditional way, rather than retooling their approach to making electric cars.
“It didn’t take long for us to discover that our bias against the internal combustion engine was so great that we weren’t actually designing the car correctly,” he told us rolling stones.
Meanwhile, when comparing the all-electric Mustang Mach E to the Tesla Model Y, the Mustang is 70 pounds heavier because Ford handles internal wiring in a more traditional way.
He added that Elon Musk’s automaker is considering designing its vehicles differently.
“They said, ‘Let’s design the vehicle for the lowest, smallest battery.’ A completely different approach,” he said.
Farley said the third and perhaps biggest storm is the regulatory crackdown that will accompany the move to lower carbon emissions.
“Everyone thinks that inning one or two and three will be all-electric,” Farley said.
Instead, expensive batteries and the Trump administration’s weakening of emissions standards have changed things. In December 2025, Trump lowered the mandatory annual improvement rate for automakers’ emissions to 0.5% per year from the Biden administration’s 2% per year, with a steady reduction to 0.25% in 2031.
The National Highway Safety Administration predicts that this move will reduce the average mileage per gallon for light vehicles to 34.5 miles per gallon by 2031, from 50.4 miles per gallon under Biden-era standards.
“What this really means is that if there are no regulations, then every OEM will fall back on their cultural norms,” Farley said.
However, Ford is hedging its bets. If emissions standards can change under Trump, it’s likely they will change under the next president.
As a result, Ford abandoned its plug-in electric vehicle business and scrapped the F-150 Lightning in December. The company is betting its future on hybrids, extended-range electric vehicles (EREVs) and smaller, affordable electric vehicle platforms.
“If we didn’t put the chip in the right number and the right color, Ford probably wouldn’t exist,” he said.
This story originally appeared on Fortune.com