Ford won’t develop cheaper, separate brand to boost growth in China

Automaker has plans to develop eight cars in China by 2015, where it’s broken ground on two new plants.

August 29, 2012   by The Canadian Press

HANGZHOU, China—Ford Motor Co. is developing a lower-priced small car for the Chinese market but has no plans to start a separate, cheaper brand in China as rivals General Motors and Volkswagen have.

Ford executives discussed their plans during a three-day tour that ended Wednesday at the groundbreaking of a new assembly plant in the eastern city of Hangzhou. The $760 million plant, which is Ford’s first plant on the populous east coast of China, is expected to open in 2015.

“Hangzhou is really critical because of the market it serves, and it diversifies our operations,” CEO Alan Mulally said.

He said the city has good infrastructure and a trained workforce that will help Ford expand.

Ford won’t say what it plans to build there, but Ford China CEO Dave Shoch confirmed this week that a new small car similar to the Chevrolet Sail will be among the eight vehicles Ford is bringing to China by 2015.

Ford’s growth in China has been stymied by two things: It has just seven vehicles on sale here, compared with 30 for GM, and those it sells are relatively expensive. The Sail starts at around $10,000. Ford’s cheapest offering right now, the subcompact Ford Fiesta, starts at $13,316.

Ford Asia Pacific chief Joe Hinrichs says the company learned a lot from the development of the Figo, a $6,800 subcompact it sells in India. But Ford won’t sell the Figo, which is smaller than the Fiesta, in China, Hinrichs said, in part because it’s a right-hand drive car.

One thing the company won’t do to attract more price-sensitive buyers is form a cheap, Chinese-only brand. Most of Ford’s rivals—including GM, Volkswagen and Nissan—have established lower-priced brands in the last year at the request of the Chinese government, which has gotten increasingly concerned that Chinese car companies are falling behind their foreign rivals.

Hinrichs said Ford is studying whether to form a new brand, but thinks China, which has more than 100 car companies, has too many brands already. So far, the government has approved Ford’s growth plans without insisting on a new brand, he said.

Ford is in the midst of its biggest production expansion in 50 years in China. Last week it broke ground on a $600 million plant in the southwestern Chinese city of Chongqing and has announced it will bring its Lincoln luxury brand to China in 2014.

Ford says the new plants are key to its plan to increase global sales by 50% to 8 million by 2015.

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