Ford in Talks to Build a Small Car in China
By CRAIG S. SMITH
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S HANGHAI, Aug. 2 -- The Ford Motor Company is deep in negotiations
with the Changan Automobile Group to build an affordable passenger car
in China, the latest in a series of signs that the country is
loosening its grip on the auto industry ahead of its expected entry
into the World Trade Organization later this year.
Ford has tried for years to get into the Chinese market after having
lost to General Motors in a fierce competition in the mid-90's for the
last major car deal sanctioned under the government's auto-industry
master plan. After G.M. won the right to build Buicks in Shanghai,
officials started talking instead about shutting manufacturers down.
China has more than 100 car manufacturers, including those that
assemble cars using kits imported from abroad.
But China fears that without an expanded domestic car manufacturing
base, imports could quickly dominate the growing market after the
country joins the W.T.O. So the government is relaxing its grip on the
industry, allowing car companies rather than officials in Beijing to
decide what the market can bear.
Honda was allowed to buy a defunct Peugeot joint venture in Guangdong
province, in the south, several years ago, and earlier this year
Toyota signed a deal to make passenger cars in the city of Tianjin, in
the northeast. Car companies have also been allowed to set their own
prices again; after a price war in the late 90's, officials had
stopped the industry from cutting prices further . The Chinese joint
ventures of Citroën, Volkswagen and General Motors have all reduced
prices on their cars in the last few months.
While China's automobile sales growth has been sluggish in recent
years and the market has fallen far short of the ebullient estimates
made in the mid-90's, no one doubts that the country will eventually
become a major auto market. The cities are already choked with cars,
but the country's eastern region is crisscrossed with new highways,
most of them largely empty of vehicles. And a campaign to develop the
long-neglected western region includes plans to build more roads
there.
Already, manufacturers like G.M. are reporting an unexpected surge in
the number of private car buyers. And small, affordable cars, like the
boxy Suzuki Alto already made by Changan, are the fastest-growing
segment of the market.
In June, Beijing finally gave Ford the go-ahead to negotiate a joint
venture. "Changan and Ford are now in negotiations trying to formalize
details and prepare the proper documents required to put the proposal
to the government for a final approval," said Kenneth Hsu, a Ford
spokesman in China.
Mr. Hsu declined to talk about what kind of car might be built or how
large the venture might be, but auto analysts suggest that Ford is
considering a version of its Ikon, a compact four-door sedan that the
company created for the Indian market. The car would be larger than
Changan's Alto but still in a price range that would put it in reach
of China's new private car buyers.
Ford currently has six Chinese joint ventures producing auto parts and
offering after-sales service. It also has a 30 percent stake in the
Jiangling Motors Corporation, which makes the Ford Transit, a light
commercial van.
Ford is not the only maker contemplating a small car. Toyota's joint
venture in Tianjin will produce one. And because China has relaxed
restrictions on new models by joint ventures, Volkswagen is expected
to soon introduce a small car at its Shanghai venture. General Motors
has studied building a version of the Opel Corsa at its Shanghai
plant. The company has so far declined to comment on reports
suggesting that it may introduce a small-car model as early as this
year.
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