Weak at home, Ford, Toyota turn to China market

Ford Motor Co. plans to build a new assembly plant in China while Toyota Motor Co. will start selling an entry-level family car there, as the world's automakers pour more resources into the fast-growing Chinese car market amid weakness in their home countries.

Ford said Friday it plans to spend $490 million on a third assembly plant in China. The factory will make the next-generation Focus compact car, which Ford plans to sell globally.

The announcement from the central Chinese city of Chongqing comes the day after the Dearborn, Mich., automaker unveiled a made-in-India compact car — part of a plan to boost sales in Asia, a region the automaker has hardly dented but is counting on to drive growth.

Meanwhile, an executive at Japan's Toyota announced plans Friday to introduce a cheap family car in China. Executive Vice President Yukitoshi Funo gave no details of the new model, but he said Toyota is also hoping to increase its dealerships base in China.

Toyota now has about 550 dealerships in China, including Lexus showrooms. By contrast, the automaker has about 1,400 dealerships in the U.S.

China is proving a lifesaver for all the world's big automakers, which are plowing investment into the country to help offset miseries elsewhere.

"China is one of the few markets worldwide which still keeps growing this year. It's obvious any automaker would like to set up plants here," said Zhang Xin, an analyst at Guotai Junan Securities, in Beijing.

Total auto sales in China so far this year surpassed those in the U.S. for all but two months, rising 30 percent to 8.33 million units, according to the China Association of Automobile Manufacturers.

In the same period, U.S. sales plunged 28 percent to 7.1 million units, according to Autodata Corp., a research firm.

U.S. monthly sales got a temporary boost in August from the Cash for Clunkers program, which subsidized consumers who traded in older cars and bought fuel-efficient ones. But industry analysts say sales have fallen sharply since then.

Sales in China are expected to continue climbing to 12.6 million units in 2009, up 35 percent from last year, said Xu Changming, a senior economist with the Cabinet's State Information Center in Beijing. Those figures are expected to get a boost from subsidies that the Chinese auto industry is lobbying Beijing to extend.

The government is due to decide by mid-December, Xu said, if it will continue the subsidies, which are aimed at promoting energy-efficient vehicles.

"If the policy is extended to next year, rapid growth of auto sales will be sustained," Xu said. "Otherwise, it will fluctuate, and it's hard to predict the degree."

Automakers are counting on continuing sales growth in China. Ford's Chongqing plant, part of the carmaker's joint venture Changan Ford Mazda Automobile Co., is the third for Ford in China and its second in Chongqing, an industrial hub of 30 million people sprawled along the upper reaches of the Yangtze River.

Slated for full completion by 2012, Ford said the plant will be equipped to make other small cars on the company's global C-car platform in addition to the Focus.

Ford lags behind other automakers in Asia, capturing only 2 percent of auto sales there, compared with nearly 15 percent in North America and 10 percent in Europe.

Toyota's Funo, meanwhile, stressed the sales potential of an entry-level car in China, comparing it to how Japanese had snatched up the Toyota Corolla subcompact during the island nation's decades of modernization.

Like other major automakers, Ford and Toyota have been hit by the slowdown in mature markets such as the U.S., Europe and Japan. Toyota is expecting to lose money for the fiscal year ending March 2010. Ford has not had an annual profit since 2005.

Ford shares rose 10 cents to $7.43 in morning trading on Friday. U.S.-traded shares of Toyota fell 45 cents to $81.78.