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July 29, 2015

US: Negative pricing pressure in China continuing – Ford’s Fields

Ford CEO Mark Fields has told analysts that current trading conditions in China are creating negative pricing in the automotive sector, although long-term prospects for the world's biggest market remain very bright.

Ford CEO Mark Fields has told analysts that current trading conditions in China are creating negative pricing in the automotive sector, although long-term prospects for the world’s biggest market remain very bright.

Ford this week said it was “on track for a breakthrough year” after posting its best automotive quarterly profit since 2000 in the second quarter of 2015.

The Asia-Pacific region posted record profit for Ford in the second quarter, although some analysts are concerned about slowing demand in China and the dangers of overcapacity in the automotive sector leading to reduced profitability for OEMs generally.

In a telephone briefing with analysts, Fields confirmed slower overall market demand and ongoing pricing pressures in China. “It’s clear we’ve seen a market slowdown in the industry,” he said. “We’ve seen commercial vehicles actually come down more than passenger vehicles in the past year, which is a bit of an indicator to us. And that [lower volume] is putting pressure on the likely suspects around pricing.”

“We’ve also experienced negative pricing in this market for quite some time, but it’s continuing now,” he added.

However, Fields said the current market cooling needs to be put into perspective. “It’s the biggest market in the world right now. By our forecast it’s going to grow to about 30m vehicles in the next five to ten years. So we’re still very bullish on China, but it’s going to go through its fluctuations and that’s what happens in emerging markets and we’re going to work our way through it in a positive way, and grow the business,” he said.

Fields also said that Ford is working with its local partner Changan to ensure it is bringing the right models to the Chinese market, including localising the Edge and adding the Taurus.

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