Ford aims to catch up in China

06 August 2012

BEIJING: Ford, the automaker, is planning to focus on smaller cities and "lower price points" as it seeks to catch up with major rivals like General Motors and Volkswagen in China.

Joe Hinrichs, Ford's president of Asia Pacific and Africa, told Bloomberg that the company's main strategy is to target China's less developed urban centres and inland provinces with inexpensive cars.

"If you want to become a volume leader in the world, you'll have to compete at the lower price points because that's where the growth is," he said.

"In China, we decided - and you can debate the intelligence of that decision - not to offer a full range of products. That's something we're changing."

With a view to satisfying the brief of producing more cars at a lower cost, Ford is building a $760m plant near Shanghai, due to be completed in 2015.

This factory will double the company's output in China to 1.2m vehicles a year. Crucially, the models manufactured locally will also be exempt from import taxes, which can add 25% to the price tag.

In addition, Ford will respond to the rapid growth of the sport-utility vehicle (SUV) market, where demand rose by 32% in the first half of 2012 versus 7.1% growth for the sector as a whole, by producing its Kuga and Eco Sport SUVs at its Chinese plant.

Ford, which entered China in 2002, hopes this strategy will help it make up lost ground on General Motors, which started trading in the country in 1995. Volkswagen has been making cars there since 1985.

Given the difficulties currently facing the US and Europe, Ford is especially keen to enhance its current 2.4% share in the world's most populous nation, where Volkswagen  holds 19% of the market, and General Motors takes 10% of sales.

Economic growth in China has slowed in the recent past, but vehicle sales are still projected to grow by between 5% and 8% in 2012, to 20m units, according to the China Association of Automobile Manufacturers.

Jochen Siebert, managing director at JSC Automotive Consulting, predicted that Ford's sales could soon triple in China, reaching 1.1m vehicles by 2018.

"They are on the right track, going into the right segments, doing the right things," he said. "The new products will change the way people look at Ford."

Data sourced from Bloomberg; additional content by Warc staff