Ford aims to more than triple output in China this year, executives told Reuters on Tuesday, as it races to catch General Motors and other foreign car makers in the world’s fastest-growing major vehicle market.
Ford plans to make 65,000 units in the country in 2004, less than 1% of its global production and about a tenth of arch-rival General Motors’ output in China, the report said, noting that rivals such as GM, Volkswagen and Toyota plan to spend about $US13 billion to make some six million cars in coming years – stoking fears of a glut and price war at a time when global car capacity is outstripping demand.
Reuters added that GM [announced at the weekend that it would] spend $3 billion to double output in China to 1.3 million units by 2007 while rival Toyota aims to make up to 400,000 cars by 2010.
“Ford and Toyota are working very hard to catch up. We think that’s going to be an uphill strategy,” GM’s China chief Phil Murtaugh told Reuters on Monday.
With the government in Beijing trying to gently cool China’s racing economy, some fear car sales growth could slow to as little as 10% in 2004 after nearly doubling to two million units in 2003 and that’s partly why Ford executives, while hoping to accelerate the company’s expansion, are cautious, the report said.
“Sure, we’d like to move faster, but our primary concern is to build on solid foundations,” Mark Schulz, executive vice president of Ford Asia, told Reuters ahead of the Beijing motor show. “Long-term success takes patience and prudence.”
Analysts reportedly say it may be moving too slowly.
According to Reuters, Ford commanded less than 1% of the Chinese market at of the end of 2003 with sales of 17,000 vehicles, compared with leader Volkswagen’s one-third share and GM’s 19%.
Knocked off its number-two perch on the global rankings by Toyota Motor in 2003, Ford makes cars with Chongqing Changan Automobile Co at a plant on the edge of China’s impoverished western hinterland, the report said.
Ford reportedly said the venture, Changan Ford, became profitable last year, its first year of operations, while GM’s profit from its ventures nearly quadrupled to $162 million in the first quarter. If sales growth and margins persist at those rates, China would produce about a quarter of GM’s $4 billion in profits forecast by analysts this year, Reuters said.
“The company’s troubles at home and their late entry to China mean Ford has less money to throw around than GM,” auto analyst Xu Xiang at China Southern Securities told the news agency.
Analysts reportedly said China’s car markers are in danger of cranking out more vehicles than they can sell, driving prices down as has happened in mature markets.
Daron Gifford, a managing director with ABeam Consulting, told Reuters that carmakers in the United States were sitting on some four million unsold vehicles worth $100 billion.
“China’s capacity is also in excess and growing rapidly,” Gifford reportedly told a forum on the sidelines of the Beijing show, China’s largest car exhibition.
Reuters said some car makers in China are worried.
“There’s definitely strong pressure on prices in China. It’s by far the most competitive market worldwide and everybody is decreasing prices,” Jean-Martin Folz, president of PSA Peugeot Citroen, told Reuters, adding: “There is obviously a limit to that and I hope we reach it as soon as possible.”
According to the report, Ford itself is in the midst of a multi-year restructuring programme aimed at ensuring a pre-tax annual profit of $7 billion by the middle of the decade and is working hard to boost profits in its major US and European markets.
But Reuters said that Ford cannot afford to sit still while its rivals expand and has said it aims to invest over $1 billion in China in coming years and has applied for approval to build a second plant, possibly with one third-owned Mazda, in the prosperous east.
That plant, in the city of Nanjing near China’s richest city of Shanghai, will be run by Changan Ford, the report added.
“It’s safe to say the proposed plant in Nanjing will be similar,” Changan Ford president Ron Tyack told Reuters, adding: “Most assembly plants are in the vicinity of 150,000 to 200,000 units.”
Reuters noted that Ford’s existing plant is sited some 1,500 km (938 miles) from demand hotspots such as coastal Shanghai, where GM has a joint venture that will soon build its luxury Cadillac models.
Ford, which rolled out its Maverick [Escape] and Mondeo models in China last year, plans to launch a new model each year on the mainland and eventually sell a full range of cars in the country. It expects to sell 40,000 Mondeo sedans in China this year, the news agency said.
Partner Mazda reportedly has said it is looking for ways to cooperate with the US auto maker. It said on Tuesday it aimed to increase sales by 37.5% to 110,000 vehicles in China this year, according to Reuters.