Ford in Talks to Build a Small Car in China

Stephen E Philion philion at
Thu Aug 3 00:46:23 PDT 2000

August 3, 2000

Ford in Talks to Build a Small Car in China



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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


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


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