Ford to invest $600m to branch out in China

Detroit Free Press - Ford will invest another $600 million to further expand its manufacturing base in Chongqing, China, to meet growing demand in the world’s largest auto market.

The investment by Ford and joint venture partner Changan Ford Mazda Automobile will expand Ford’s capacity in Chongqing by 350,000 vehicles, bringing total capacity to 950,000 vehicles annually.

The expansion brings total investment in the facility to $4.1 billion for the automaker that is playing catch-up to General Motors and Volkswagen, the two largest non-Chinese manufacturers in the country that also has a proliferation of domestic companies.

Ford plans to introduce 15 new vehicles and 20 new engines and transmissions in China by 2015, all of which include the automaker’s latest technologies to reduce fuel consumption and emissions by 20% in a country where air quality is a major issue.

“This expansion is an investment in Ford’s long-term future, globally and will help us to achieve our goal of increasing worldwide sales by nearly 50% by mid-decade to about 8 million vehicles per year,” said Joe Hinrichs, president of Ford Asia Pacific and Africa, in a statement.

“With this additional investment and capacity expansion, Ford continues to lay the foundation for long-term growth in the world’s largest automotive market,” Hinrichs said.

The Chinese market for both passenger and commercial vehicles was about 18 million last year and while seemingly unbridled growth has slowed, the long-term prognosis is of continued growth.

Ford sold almost 520,000 vehicles in 2011,barely one-fifth GM’s 2.5 million sales last year.

And GM shows no signs of slowing down. Today, GM and its 11 joint ventures in China reported record March sales of 257,944 vehicles, contributing to record first-quarter sales of 745,152 vehicles. GM’s domestic sales in March were up 10.7% from a year ago and up 8.7% for the best quarter since GM started doing business in China in 1908.

“GM has maintained our growth in our largest market in 2012, despite an overall industry slowdown,” said Kevin Wale, president of the GM China Group, in releasing the sales figures. “Our new models such as the Chevrolet Malibu have gotten off to a solid start, complementing the ongoing strength of established products such as the Buick Excelle, Chevrolet Cruze and Cadillac SRX.”

For Ford, Chongqing is its largest manufacturing hub outside southeast Michigan. Ford also has assembly plants in Nanjing.

The latest planned expansion of the Chongqing complex is major: a new assembly line, body and paint shop to augment the two assembly plants and engine plant already there. Another engine plant and transmission plant are under construction to meet growing domestic demand for new cars and trucks.

Construction will begin immediately and the additional assembly line is scheduled to be ready for production in late 2014.

“With a current growth rate of about 5%, the Chinese auto industry remains the biggest growth market in the world,” said Dave Schoch, head of Ford China.

“Expanding our production capacity in Chongqing is a key part of our aggressive growth plans in China and Asia, and will allow us to bring more high quality, safe, fuel efficient, fun-to-drive vehicles from our global portfolio to Chinese customers,” Schoch said.

Later this month at the Beijing auto show, Ford will show three utility vehicles – the EcoSport, Kuga (sold as the Escape here) and the new Explorer -- in a bid to be the SUV leader in China where Ford already sells the Edge.

Ford will also use the auto show to unveil the new Focus for the domestic market that started production in Chongqing in February in a new $500-million plant.

"We are working hard to secure the avid interest of Chinese consumers,” Hinrichs said.