Ford Motor Company (NYSE:F) top executive in Asia, Joe Hinrichs, is looking for a new market and has a solution for the car maker’s minnow status in China market with cheap cars in backwaters.
Hinrichs, who oversees Ford operations in the Asia Pacific and Africa region, said over lunch at Morton’s in Shanghai last week that to become a volume leader in the world, you’ll have to compete at the lower price points because that’s where the growth is in China. They decided and you can debate the intelligence of that decision not to offer a full range of products. That’s something they’re changing.
Ford Motor Company (NYSE:F)’s new offerings in China are neither cheap enough nor expensive. Ford (F)’s Fiesta subcompact, the lowest-priced of the automaker’s five models, costs 40 percent more than General Motor Co. (GM)’s entry-level Chevrolet Sail. The Volkswagen AG (VOW), Europe’s largest car maker, has a product lineup that starts from the range of 75,800-yuan ($12,000) Jetta to the 2.32 million-yuan Audi R8 sports-car.
Ford Strategy Shift in China
It’s a part of a major strategy shift of the Company’s introducing lower-priced models in China and Asia, which has historically offered products to the higher end of its price segment, said Hinrichs, who was appointed to the Asia job in 2009 by Mulally after a turn in labor affairs, manufacturing and running Ford’s operations in Canada.
In 2010, Ford Motor Company (F) introduced in India the Figo hatchback, a move that helped the car maker to almost triple deliveries in the fiscal year it went on sale. As far as China is concerned, less-developed cities in the country’s inland provinces hold the key to future sales growth, Hinrichs said.
Vehicle sales in China, including buses and trucks, are projected to rise 5 percent to 8 percent this year to 20 million units, according to the China Association of Automobile Manufacturers, even amid a relatively slow economic growth.
To offset the weaker demand in Europe, China will be the most attractive market with the biggest potential, with growth in 2009 and 2010, when deliveries grew 46 percent and 32 percent respectively, Hinrichs said.
Making its footprints strong in China would help Ford to reduce its reliance on U.S. sales, which unexpectedly fell last month, and the blunt European losses projected to exceed $1 billion this year. Other car makers including GM and VW are also pushing into the Chinese hinterland in search of the next phase of growth. Chief Executive Officer Alan Mulally is committing $4.9 billion in spending on new factories and models in Asia to back his target to raise the region’s contribution almost fivefold to a third of global sales by 2020.