China car market may need 'Two Fords'

Nov 22 2012, 12:13 IST
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Six years ago, the Six years ago, the "One Ford" mantra saved Ford Motor Co from collapse. (Reuters)
SummarySix years ago, the "One Ford" mantra saved Ford Motor Co from collapse. Now,...

Six years ago, the "One Ford" mantra saved Ford Motor Co from collapse. Now, Chief Executive Alan Mulally's unified global product strategy is facing a formidable test: winning over first-time Chinese buyers such as Zhang Haifeng.

The 42-year-old teacher has seen his pay jump 27-fold over the last two decades, as China expanded its compulsory education system. After studying his options for a year, Zhang in April paid 70,000 yuan ($11,200) for his first car - General Motors Co's Baojun 630 sedan."In the end, I thought Baojun was the most cost-effective, and best suited for ordinary people like me," he said.

China, the world's largest auto market, is the one country where GM trounces Ford. Competition there will intensify in the next three to five years, and analysts say Ford still is bogged down by expensive vehicles and an incoherent brand identity.

GM and Volkswagen AG have dominated the Chinese market in part by developing models tailored to local tastes, using older platforms, or creating low-cost brands with local partners, such as GM's Baojun.Ford has resisted such moves, choosing instead to build global cars designed mainly in Europe. The rationale is that a global platform allows Ford to quickly build cars that can be sold around the world with just a few tweaks. The cost savings can be huge and can be reinvested in improving car technology.The "One Ford" strategy, however, has had mixed success in China. Neither the Fiesta subcompact nor the Focus compact have broken into the top 10 vehicles in their respective segments this year, LMC Automotive data shows.

Wooing Chinese consumers with attractive, affordable cars is crucial if Ford is to meet its target of doubling its 3 percent China market share by mid-decade. The company now is developing what it describes as a "Value B" car, which is Ford's first attempt at a sub-$10,000 compact for the Chinese market.

Over the next three years, Ford will also expand its product range to 15 vehicles from the current five, as well as launch its upscale Lincoln brand in China. Early next year, Ford will launch three more sport-utility vehicles."It's so important to have more products at different price points in order to grow the volume and grow the share," Joe Hinrichs, who has led Ford's Asian and African operations for three years, said in an interview earlier in November."We shouldn't have to use historical legacy platforms," Hinrichs said. "The Figo in

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