Ford to increase manufacturing capacity in China

Ford, the world’s second-biggest carmaker, will invest as much as US$1.5 billion in China over the next several years to expand manufacturing capacity at Changan Ford in Chongqing, Sichuan province, from the current 20,000 units a year to 150,000, by adding a second car plant and a new engine plant.        

Ford CEO William Clay Ford said Friday at a news conference in Beijing that “The automotive future of China is very bright and we are   participating fully in its growth.” He added that "The purpose of the additional investment is so we can bring more products to the rapidly expanding market." Indeed, car sales in China smashed the one million-unit barrier last year and were expected to rise to some two million sedans in 2003. McKinsey & Co. forecasts that car sales in China will triple to 5.8 million units by 2010.

In 2001, Ford established a 50/50 joint venture with Changan Automobile Group. Ford invested US$49 million to build a factory near the Yangtze River. Meanwhile GM and its Chinese partner spent a combined US$1.6 billion on their first venture in China.

The Chongqing factory has the capacity to assemble approximately 50,000 units per year. Ford Motor (China) marketing vice-president Dale Jones earlier this year said the plant was capable of making four models at the same time. It includes a paint shop, a welding shop and an assembly building and employs 800 people.        

In January 2003 Ford launched production and sale of a four-door sedan based on the popular Ford Fiesta, with more than 200 changes to meet the unique needs of the Chinese market. The Fiesta, with engines of 1.3 or 1.6 liters, ranges from 88,800 Yuan to 127,800 Yuan. The cheapest is less expensive than the Buick Sail, GM's comparable product in China. The Fiesta also competes with Volkswagen's Polo, Honda Motor's Fit and Toyota's Vios.

In May 2003 Ford rolled out its larger Mondeo sedan models and in July they started assembling the Maverick, a compact sport-utility vehicle. Going forward, Ford intends to launch at least one new model annually in China.        

Ford passenger vehicle dealerships in China have increased from 17 to 26 by mid-2003. Its brands Jaguar, Land Rover and Volvo also sell vehicles in China through a growing distribution network. Mazda also is growing steadily in China, with contract assembly of vehicles and sales through an expanding network of Mazda dealers.

Ford also owns a 30 percent stake in Jianling Motor Corp. in the southern province of Jiangxi, through which it has produced the Transit delivery van since 1997.        

Ford also has six smaller joint ventures producing auto parts and components. Its financing company, Ford Credit, has opened an office to prepare for the opening of the auto financing business to foreign companies.

The new investment plans include a second car plant and an engine unit, the company said. Bill Ford said he intended to make and sell a full range of luxury cars in China, but declined to give a timeframe. Besides Jaguar, Land Rover and Volvo, its brands include Lincoln, Mercury and Aston Martin.        

But the firm is considered a relative latecomer to the modern Chinese market, launching its first car 18 years after its first competitor did.        

GM, Volkswagen and Toyota Motor are expanding local production to meet  rising demand from increasingly wealthy Chinese urban residents.   

Arch-rival General Motors Corp. is four years ahead of Ford. It started to make Buicks in Shanghai in 1999. GM commands about eight percent of the market and recently stepped up its manufacturing capacity to 200,000 cars per year.

Volkswagen, which makes two in five cars on Chinese roads and which counts China as its biggest sales market after Germany, started producing vehicles in Anting in 1985. Currently they make 880,000 vehicles a year in China and announced in July a five billion dollar expansion to  double production to 1.6 million units coming years.        

Toyota has set aside US$ 400 million to expand production in China to 400,000 units by 2010, and wants to capture 10 per cent of the car market by then.