Ford’s determination to be a major player in Chinese auto production is unquestionable.

The firm has announced plans to build a second car plant in the booming eastern region of the country as it tries to catch up with rivals in this market. Although the move may not match the scale of Volkswagen‘s investment, it will doubtless deliver a tangible boost for Ford and its partner Changan.

The American manufacturer is to build its second car plant in China’s eastern Jiangsu province as part of its $US1.5 billion expansion plan to boost production capacity. As the plant will be located close to the booming port city of Shanghai, Ford will be able to reduce the cost of transporting raw material and shipping out vehicles. The company, which has refused to give details on what models the new plant would produce, is awaiting final approval from the government.

Since its Chinese venture was launched in 2001 with Chongqing Changan Automobile, Ford has followed a policy of phased investment in order to expand in a market regarded as one of the world’s most promising. The second plant will reinforce the manufacturer’s position to compete with established US, German and Japanese rivals.

Ford, which sold 120,000 vehicles in China in 2003, is hoping to sell 200,000 vehicles by the end of 2004. However the American giant still needs to catch up with rivals such as Volkswagen, whose sales reached 510,000 units in 2002. Last year the German group sold 694,000 vehicles, and it has also announced plans to produce two million cars annually by 2007/2008.

Following a late entry into the Chinese market, Ford is struggling to get off the ground, although the manufacturer still has room to grow. Forecasts predict that the Chinese market could be as large as Japan’s by 2010 and as big as the US market by 2025. Even the three biggest manufacturers in China, Volkswagen, GM and Honda, are finding that their capacity cannot keep up with demand in the country.

The Chinese partnership is proving to be of mutual benefit. It is allowing Ford to launch new models and expand its sales network in the country, while partner manufacturer Changan is becoming more competitive by increasing its annual production.

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