Ford plans to build a second car plant in eastern China to serve the booming area around the country’s commercial hub, the company said on Monday according to Reuters.
Ford, which aims to invest more than $US1 billion in the world’s fastest growing major car market in coming years, reportedly signed an agreement on Saturday that secured it rights to use land in Nanjing, a three-hour drive from China’s richest city, Shanghai.
Reuters said the new plant would grant Ford access to the bustling eastern provinces as well as better talent pools, as it strives to compete against entrenched rivals General Motors and Volkswagen in the coastal markets, but analysts reportedly said Ford’s move may be too little too late, with those two better-established rivals together controlling about half the country’s car sales.
“They came to the market very late and this makes their job of competing with GM and Volkswagen that much more difficult,” Angela Gu, an analyst at independent industry consultancy Automotive Resources Asia, told the news agency, adding: “But the new plant is not just closer to the main markets – the labour pool is superior too.”
According to Reuters, Ford declined to specify which models the Nanjing plant would make, or the investment involved, though analysts said a cutting-edge facility could cost $1 billion.
Until now, most industry observers had focused on Ford’s ambitious expansion at its maiden manufacturing base in the country, in the far-flung city of Chongqing where Ford last year said last year it would expand output seven-fold at its joint venture with domestic player Chongqing Changan Automobile Co Ltd, the report said.
Ford executives told Reuters that the Nanjing plant would also be run by that venture, Changan Ford Automobile Corp Ltd.
The report said that Changan, which also has a partnership with Suzuki, owns a minibus-making venture not far from the planned site of the new Ford plant in an industrial estate.
“Once we’ve received final approval, we’ll announce what models the plant will make,” Ford spokeswoman Susan Zhu told Reuters, which noted that car sales in China exceeded two million in 2003 and are expected to jump another 40% this year as the economy races ahead.
The report noted that Ford’s current facility, in the landlocked western city of Chongqing, rolled out its first cars only in January 2003, years behind the competition. That plant is increasing annual production to 150,000 [from 20,000, according to recent reports] but this lags behind GM, which has unveiled plans to produce 766,000 units by 2006. And Volkswagen, the dominant player, wants to sell 1.6 million cars a year over a similar period.
Volkswagen controls 33% of the market, while GM trails in second place with just under 10%. Ford figures were not available, Reuters said.
A Dow Jones report last week said the Chongqing Ford joint venture had sold over 13,000 locally-built Fiestas and over 4,000 Mondeos in 2003.
According to Reuters, some analysts are questioning if Ford, with around $10 billion in investment in the auto sector due to come on line over the next few years, would ever see a return on its money.
“More and more cars are coming out and we’ve already seen major price cuts last year,” Lin Wenjun at Capital International Holdings told the news agency, adding: “Ford’s current models in China are just not competitive, and it’s unlikely new ones will be either.”
Reuters said the company, 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.
Reuters noted that Mazda, in which Ford holds 33%, has said it would cooperate with Ford as it maps out a strategy for China. However, Changan Ford spokeswoman Marina Guo reportedly declined to say if the Nanjing plant would be built in concert with Mazda, but said they were always looking for opportunities to work with them.