US automotive giant Ford will invest $600 million into its Chongqing, China, manufacturing base in hopes of profiting from the world’s largest automotive market. Funding from Ford and venture partner Changan Ford Automobile will enable the Chongqing plant to produce 950,000 vehicles each year, or up by 350,000 vehicles for a nearly 60% production increase.
The $600 million will raise the total amount invested in the Chongqing facility to over $4 billion. With this investment Ford hopes to keep pace with Volkswagen and General Motors, the top foreign auto manufacturers in China. In 2011, Ford’s sales in China came in at around 20% of General Motors, which sold 2.5 million vehicles and continues to boast record sales.
The Chongqing manufacturing base is Ford’s largest assembly plant outside of its southeast Michigan headquarters. Expansion plans, including a new body and point shop, assembly line, transmission plant, and engine plant, are set to be under construction right away and should be complete by 2014.
Ford’s long-term goal is to increase worldwide sales “nearly 50% by mid-decade to about 8 million vehicles per year,” according to a statement by Joe Hinrichs, president of Ford Asia Pacific and Africa. By 2015, Ford also plans to unveil 20 new engines and transmissions, and 15 new vehicles in China, with technologies designed to reduce emissions and increase fuel efficiency.
By 2020, Ford envisions a third of sales coming from Asia. It seems Chongqing is the first step toward this goal, as Ford’s China Chairman touts these expansion plans as a “key part of our aggressive growth plans in China and Asia.”
China’s Rapidly Growing Auto Market May Soon Stabilize
Last year, the demand for commercial and passenger vehicles in China was 18 million. China’s auto industry is the largest in the world, with a growth rate presently around 5%. In years to come growth may slow down due to the general economic downturn and rise in fuel costs, in the opinion of Gu Xianghua, deputy secretary general of the China Association of Automobile Manufacturers.
However, while the Chinese auto market has declined overall, sales of luxury vehicles have remained strong. On the whole, the Chinese automotive market should continue to grow steadily, if not as rapidly.
Key Statistics (source: MarketLine)
- In 2010, the total revenue generated by the Chinese automotive manufacturing industry totaled nearly $175 billion, signifying a compound annual growth rate (CAGR) of more than 17% from 2006 to 2010.
- With a CAGR of 11.5% from 2006 to 2010, industry production volumes rose to over 44,400 thousand units in 2010.
- It is expected that industry performance will slow down, with a CAGR of 12.5% from 2010 to 2015. At that rate, by December 2015 the industry will reach a value of slightly over $313 billion.