Late to the Chinese market, Ford aims to catch up

CHONGQING, China -- Dave Schoch has one of the toughest jobs at Ford Motor Co.: catching the competition in the world's biggest car market.

When Schoch arrived in China 13 years ago, the government was building eight-lane freeways in major cities, but bicyclists and pedestrians still filled the streets. The Chinese were buying fewer than 2 million cars and trucks each year, a fraction of the 14.4 million sold in 2000 in the U.S.

When he returned to China last year, Schoch was stunned. The freeways were choked with cars, from inexpensive, Chinese-made Wuling minivans to Mercedes-Benz sedans. The red-hot Chinese economy had more than doubled annual wages, giving millions of people the money to buy a first vehicle or move up to a luxury brand.

"Things turned upside-down," says Schoch, who was named head of Ford's Asia Pacific operations in the fall. "You have to be here and experience it to believe what has happened in the last decade."

Last year, Chinese consumers bought 19 million cars and trucks - 5 million more than consumers in the U.S. Ford's share of those sales was just 3 percent. Years of corporate chaos and financial trouble slowed Ford's entry into China as its rivals gained a foothold. Together, General Motors and Volkswagen control a third of China's market.

But the race is far from over. China is still a country where just 58 out of every 1,000 people own cars. In the U.S., that number is closer to 800.

Every year, tens of millions of Chinese are reaching the income threshold they need to buy a car, Schoch says. Many analysts predict annual sales in China of 30 million by 2020, almost double the U.S. forecast of 17 million. It's up to Schoch to ensure Ford gets a big chunk of that phenomenal growth.

"I go home each night thinking, 'Have I really tried to move the needle? Are we moving the organization fast enough to take advantage of this? Because I really think we have a golden opportunity here," he says.

Ford wants to double its Chinese market share to 6 percent by 2015. To make that happen, the company is launching six new vehicles in China this year, including two small SUVs called the Kuga and the EcoSport, the Mondeo midsize sedan and the Explorer SUV, which is exported from Chicago. The Lincoln luxury brand will arrive next year.

To meet its goals, the company has undertaken its most ambitious growth since Ford went on a post-war building spree in Michigan 60 years ago.

Ford is spending $5 billion to build five plants - including three assembly plants, an engine plant and a transmission plant - that will more than double its Chinese production capacity to 1.7 million vehicles by 2015.

"They used to be laggard, cautious. But now they're all in," says Michael Dunne, president of the automotive consulting group Dunne and Co. in Hong Kong. "They are saying, 'We have confidence in the China market. We have confidence in our products. We can win here.'"

Ford sold a company record 407,721 vehicles in China in the first six months of this year. But that was only a quarter of the vehicles GM sold. Volkswagen has six brands aimed at every type of buyer in the vast Chinese market, from the cheap Skoda to the ultra-luxury Bentley. Until Lincoln arrives, Ford has just one.

There are other obstacles. Ford cars are expensive. In a market where 70 percent of vehicles sold cost less than $14,500, Ford's cheapest car is the Fiesta, which starts at $13,300. The Explorer starts around $80,000 thanks to a 25 percent import duty and other taxes.

Associated Press writer Fu Ting in Beijing contributed to this report.

Source: http://www.miamiherald.com/2013/07/09/3491246/late-to-the-chinese-market-ford.html

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