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Old 08-08-2003, 06:50   #1 (permalink)
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China:Ford buttresses China lineup; several models to be produced locally

By ALYSHA WEBB | Automotive News

SHANGHAI - Ford Motor Co. will add four locally made vehicles to its model mix here by 2007, according to supplier sources familiar with the automaker's plans.

The automaker is rushing to catch up after a late entry into China's booming market.

Ford China executives would not discuss their plans last week. But supplier sources say the automaker will begin producing the mid-sized Mondeo sedan, the lower-medium Focus, a Mondeo-based sport wagon and the compact Maverick, an Escape-based SUV, in China over the next four years.

Ford made its passenger-car debut in China in January with the Fiesta supermini, which it produces at its Changan Ford joint-venture plant in Chongqing.

The operation will turn out 20,000 Fiestas this year.

The goal is to reach the plant's capacity of 50,000 next year.

In May, Ford also began importing the Mondeo from Taiwan. That was followed by the Maverick last month.

Another Ford venture in China has been producing light commercial vans with Jiangling Motor Corp. in Nanchang since December 1997.

As expected, the Mondeo will go into production in Chongqing from knockdown kits late this year or early next year, supplier sources confirm. In 2005, production of the Focus and Maverick will begin, followed by the Mondeo-based sport wagon in 2006. The following year, a redesigned Mondeo will go into production.

Sources say Ford will build some of the models at one of its partner's plants in Nanjing, a city several hours east of here, rather than invest to expand Changan.

The Changan joint venture has a design capacity of 150,000 to 170,000 units a year, but it would take years to expand the plant to that level.

Analysts lauded the move to bring in more models but cautioned that Ford still may be moving too slowly.

"If you are Ford, you can't afford to wait," says Lawrence Ang, an automotive analyst for Deutsche Bank in Hong Kong. "If you want to win, the only chance is to get in early."

Yun Liu, an analyst in Hong Kong for European investment bank CLSA Asia Pacific Markets, says it is especially critical for Ford to boost Mondeo sales through local production.

Local production would help make the car more competitive in the important upper-medium sedan segment, a class of car bought by government and business people.

At the equivalent of $34,400, the imported 2.0-liter Mondeo is pricier than its principal competitors. The locally produced Honda Accord is priced at $32,000, while the VW Passat and Hyundai Sonata are at $27,000.

"In mid-sized vehicles, Ford is really behind," Liu says. "If they don't increase their sales drastically in the 2.0-to-3.0 liter segment over the next two years, they stand the risk of being marginalized."

Analysts and industry executives expect the Focus, Ford's best selling car worldwide, to do well in China, and many wonder why it wasn't Ford's launch car here.

"This should have been the model Ford started with in China," says an executive with one multinational supplier based here.

Sales in the lower-medium sedan segment, which embraces a price range of $14,500 to $18,500 here, rose 80 percent in 2002, says Automotive Resources Asia, an automotive consulting firm with offices in China and Thailand.

But the segment has become jammed. From almost no entries two years ago, the segment this year includes Nissan's Sunny, Volkswagen's Jetta and Bora, Citroen's Elysee, Mazda's Familia and GM's Buick Excelle.

Ford is chasing the global industry's steepest growth curve. After years of ho-hum performance, passenger-vehicle sales in China exploded 56 percent in 2002 to an estimated 1.2 million units. But the market, effectively created 20 years ago by Volkswagen, has become crowded with formidable competitors.

Besides Volkswagen, which still holds a commanding 34 percent share, the competition includes General Motors, which has a 150,000-unit plant in Shanghai and a claimed 10 percent of the market, and several European brands.

Looming even larger on the competitive horizon are Japan's Big 3 - Toyota, Nissan and Honda. The three Japanese automakers have announced major expansions here that will create more than 1 million units of additional capacity a year.

In the wings: Korean automakers Hyundai and Kia, awaiting final approval for plans to produce more than 500,000 cars a year.
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