China's car market was set for steady growth and stable prices despite a collapse in sales growth and heavy discounting last year, the head of Ford Motor Co.’s main joint venture in China said.
Ron Tyack, chief executive and president of Ford's 50-50 venture with Chinese carmaker Changan Automobile Co. Ltd., said a sharp fall in all car sales in China in the second half of last year was no more than “a bump on the road.”
He said the market could grow by 10 to 15 percent a year over the long term in China, where rising affluence had driven millions of people to the car market for the first time.
“I've seen unbelievable change in the automotive industry in China,” Tyack said. He said that when he arrived in China eight years ago, under 100,000 cars a year were being sold, fewer than in his native Australia.
A total of 5.2 million vehicles, about half of them passenger cars, were sold in China last year, up about 13 percent from 2003. Ford projects total sales of 5.6 million this year.
Changan Ford, which builds small Fiesta cars and Mondeo sedans, plans to add the mid-range Focus model to its production lines at
Chongqing late this year.
Ford brand sales last year were 63,000 cars, a 103 percent rise from 2003. Growth in the market came to an abrupt stop in mid-2004 and price cutting set in after the Chinese Government took steps to rein in overheating sectors of the economy.
“There has been a little bit of a roller-coaster ride in the industry in the last year,” Tyack said, adding that some competitors had halted production for up to three months.
He forecast that Ford brand sales in China, most of them from Changan Ford, would grow 50 percent this year to just under 100,000 cars.
“I believe there will be continued stability in pricing levels with minor negotiable discounting through the dealers and products, where last year there was about a 6 percent reduction on average in the industry on pricing,” Tyack said.
Ford, the world's third-largest automaker, trails rival market leaders Volkswagen and General Motors Corp., which have been in China longer.
Tyack shrugged off suggestions that Ford was late to the party. The Changan Ford plant made a profit in its first year.
Tyack, who gave no figures, said the venture also made “an acceptable profit” last year and would do so again this year.
“In our business, we are right on track with what we want to do,” he said.
“We are not here for one or two years, we're here for 100 years, and if we don't establish the right processes, principles, with our consumers and distribution, that can hurt the brand position for the long term.”
Tyack said the
Chongqing plant, built in 2001, would be able to work at its full capacity of 200,000 cars a year within the next two months. Many of the cars made at
Chongqing are loaded on to barges for the long trek down the Yangtze River through the locks of the new Three Gorges Dam to Shanghai.
The joint venture also began work in April on a second assembly plant at Nanjing, where Tyack said capacity would be 160,000 with scope to double that when necessary.
Ford has also received approval to make engines in Nanjing, Jiangsu Province, in a venture with Mazda Motor Corp. and Changan, and produces commercial vehicles with the parent of Jiangling Motors in southern China.
On May 26, Ford Motor Credit, which is part of Ford, said it received final approval to provide auto financing in China and expects to commence operations at the beginning of the third quarter of this year.
Its Chinese venture, Ford Automotive Finance China (FAFC), will support the sale of vehicles manufactured in the country as well as imported cars.
FAFC would initially offer loans for Ford brand dealers but planned to expand financing to dealers of other company brands such as Volvo, Land Rover and Jaguar, according to a statement issued in the United States.
