Auto Industry

A Chinese Focus

Will new factories help Ford catch China rivals?

General Motors brands have outsold Ford by 5-to-1 this year in China, according to research specialist LMC Automotive. In fact, Ford holds just 2% share of the Chinese passenger car market.

Not to worry, says Ford Asia chief Joe Hinrichs, who is overseeing a two-pronged attack to wrest back market share for the Dearborn, Michigan-based firm.

Hinrich’s approach comprises a new push into the SUV segment for wealthier customers (see previous article), as well as the sale of lower-priced value models like the Focus to customers in cities further inland.

Analysts seem to support the bet on smaller, inland cities, citing evidence of sales saturation in wealthier cities along the eastern seaboard, where Ford also faces stronger competition from well-established rivals like GM and Volkswagen.

The problem for Ford is that it is playing catch up in China, after arriving much later than its competitors. Its first passenger car wasn’t launched in China until 2003, when Volkswagen and GM already had hundreds of thousands of customers. And Mike Dunne, an industry expert, told Louisville’s Courier-Journal last week that Ford executives erred by launching the Fiesta as their first brand. Dunne says this small car disappointed many prospective buyers.

That was in the past, says Ford, which has been highlighting a $4.9 billion investment in new production in China, mostly in Chongqing. A second major facility is planned to open in Hangzhou in 2015.

Hinrichs says that these new investments will help him introduce at least 15 new brands into the China market by 2015.

For the SUVs, the plan is to build the more compact Kuga and EcoSport models in Chongqing, while the larger Explorer will be imported, joining the Edge, which is already sold as an import from Canada. Ford will add the Kuga to the production schedule at the Changan Ford Mazda Automobile Chongqing Plant 2, where it began making the Focus – categorised as a compact car – in February.

The Focus will sell for as little as Rmb107,000 ($17,000) and is aimed at first-time buyers, who make up 65% of the Chinese market, according to the company.

All of this investment means additional costs for Ford today and analysts were disappointed when the company posted a $95 million loss in the Asia-Pacific region – a business unit dominated by China – for the most recent quarter.

But Ford still expects a full year profit for the region as new capacity comes online, and as the longer term strategy starts to take effect.


© ChinTell Ltd. All rights reserved.

Exclusively sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.