Ford encounters pricing pressure as China auto market slows

Article by Christian A., on August 10, 2011

As the auto market in China slows, the pricing pressure on Ford Motor Co. increases. At the JP Morgan auto conference in Detroit, Joe Hinrichs, Ford's group vice president and Asia chief, said that during the past 3 or 4 months, the rate that the industry is growing is not the same as it was last year or in the first quarter of the year.

Ford has invested $1.6 billion to produce four factories in China, where it plans to triple its lineup by releasing 15 models by the middle of the decade.

J.D. Power & Associates said that Ford has 2.7% of the passenger-vehicle market in China through June, falling behind General Motors Co.'s 10% share.

Ford continues to depend on the U.S. and Europe for the majority of its sales and profits. Hinrichs said that Ford expects the Chinese government to later implement measures to encourage auto sales.

So far this year, Ford's sales have gone up by 13% to 14%, doing better than the 5% growth rate in the market. He added that this growth rate is “not nearly as aggressive" in China as in previous periods.

Ford predicts Chinese sales to climb by 5% to 10% each year over the next five years. Hinrichs shared that Ford's costs in China have the same value as that of its rivals.

Hinrichs clarified though that Ford still expects to be able to compete in China. Last June, CEO Alan Mulally said that by 2015, growth in Asia will help boost annual global sales by 50% to 8 million vehicles.

From January to June 2011, Ford earned $4.95 billion. Despite the slowing U.S. auto market, Ford has attracted numerous buyers for its fuel-efficient models such as the Fiesta subcompact.

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Topics: ford, china

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