Ford and Changan may expand

The Chinese automaker Chongqing Changan Automobile has entered into discussions with its joint venture (JV) partner Ford Motor Co. (F - Analyst Report) to expand their presence outside China. To this extent, Changan is also teaming up with Shanghai Automotive Industry Corp. (“SAIC”) in order to expand its tie up with Ford beyond the current terms and conditions.

Last month, Ford, Changan and Mazda Motor Corp. have received approval from the Chinese government to split their three-way JV, Changan Ford Mazda. Ford and Mazda will each form a separate 50:50 JV with Chongqing Changan Automobile Co. by the end of this year.

The automakers will likely spin out the JV's factory at Nanjing as a 50-50 JV between Mazda and Changan while Ford and will run the JV’s other factory in Chongqing with Changan.

Ford owns a 35% stake in Changan Ford Mazda, with Changan holding 50% and Mazda the remaining 15%. The venture has posted a staggering 55% rise in sales to 316,139 vehicles in 2009, driven by the Chinese government’s incentives to push auto sales.

The new expansion plan is possibly a part of Ford’s major expansion plan in the emerging countries, including Argentina, Brazil, China, India and Thailand. Through the expansion plan, the company aims to tap the growing market potential in the emerging countries, especially those in Asia.

According to Peter Fleet, Ford's president for the 10-country Association of South East Asian Nations (ASEAN), Asia is expected to account for 40% of growth in the auto industry over the next five to seven years.

Since last year, Ford has also invested $510 million in China and $500 million in India as part of its expansion plan. It intends to raise annual production capacity from 450,000 vehicles to 600,000 vehicles in China and double to 200,000 units–250,000 units in India from 2010.