Ford has struggled to resurrect its fortunes over the past 12 months in the face of price pressures in the US and disappointing sales in Europe. The Chinese market has been growing strongly of late, and Ford needs to improve its position in areas such as this, which still have big potential.

Ford's determination to be a major player in China has been confirmed with its new investment of $US1 billion. This investment will boost Ford's annual capacity of production from 50,000 cars to 150,000.

Ford has been intensifying its attempts to penetrate the promising Chinese market since 1990. Its first major step wasn't accomplished until 2001when it established a joint venture with Chongqing Changan Automobile to create ChanganFord Motor, with each holding a 50% share. Until then, Ford's investments in China had been limited to making parts and light trucks.

Its first Chinese built model, the Fiesta compact, was produced in January 2003 in Chongqing. It expects to sell 20,000 models this year, rising to 50,000 next year, which would fulfil its current capacity.

With the launch of the Fiesta and more recently the Mondeo, Ford has entered the most popular segment in China, the family car. The segment is already crowded with offering from GM, Volkswagen, Peugeot Citroen and Toyota, among others, but the market remains tempting, with a 50% increase in car sales in 2002 due to booming economic growth.

Ford is keeping costs low by tapping the cheaper land and labour of its inland location. Most rivals have built factories in cities like Shanghai and Guangzhou, where expenses are considerably higher.

The manufacturer, which is in need of a sharper marketing strategy, is also focusing on its distribution system. Its number of dealers nationwide should increase from 26 to 50 next year.

Looking at the long term, it seems absolutely necessary for foreign car manufacturers to be present in China. The automotive market there has seen a remarkable development. The fall of prices and introduction of many new car models has encouraged domestic demand for passenger cars and the market is expected to reach 6 million units in 2008. With poor results and jobs cut in Europe and North America, Ford's decision to expand in China should give it a much needed boost in an area with strong potential.

SOURCE: DATAMONITOR COMMENTWIRE (c) 2003 Datamonitor. All rights reserved. Republication or redistribution, including by framing or similar means, is expressly prohibited without prior written consent. Datamonitor shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon.

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