Changan Auto, Ford discuss expanding ties beyond China

TIANJIN Sun Sep 5, 2010 4:27am EDT

TIANJIN (Reuters) - Major Chinese automaker Chongqing Changan Automobile 000625.SZ is in talks with Ford Motor (F.N) to expand their partnership beyond China, a senior Chinese executive said.

Chongqing Changan, which makes Focus and Fiesta among other models with Ford and Mazda Motor (7261.T), is joining SAIC Motor Corp (600104.SS), seeking to expand the tie with its foreign joint venture partner beyond the current terms and conditions.

SAIC and its long-time partner General Motors GM.UL has set up a joint venture in India making SAIC's Wuling brand mini trucks and vans, a move that could expand GM's market share in India and give the top Chinese automaker access to a fast growing neighboring market.

When asked whether Changan -- a front runner in China's mini vehicle segment -- is planning to team up with Ford to tap overseas markets, Zhang Baolin, president of Chongqing Changan said: "We are having discussions with each other on that. We are doing some studies currently."

Zhang made the remarks on the sidelines of an industry forum in the northern municipality in Tianjin over the weekend.

Joe Hinrichs, head of Ford Motor's operations in Asia and Africa, told Reuters in April the Detroit automaker was looking at a lot of future opportunities with Chongqing Changan.

But he declined to say whether Ford was seeking to take Chongqing Changan's commercial vehicles outside China, a move that would parallel rival GM's earlier initiative.

Other foreign automakers, including PSA Peugeot Citroen (PEUP.PA), are also looking to expand their ties with their Chinese partners beyond China.

The French car maker hopes to export cars made at its manufacturing venture with Dongfeng Motor Group (0489.HK) to the rest of Asia and possibly Russia as early as next year, its Asia chief Gregoire Olivier said.

"China is becoming more and more important for foreign automakers. It's not only a major growth engine, but also a low-cost manufacturing base which can help strengthen their positions in other markets," said Zhang Xin, an analyst with Guotai Junan Securities.

CHINA REMAINS TOP PRIORITY

China, which eclipsed the United States as the world's largest auto market last year, has been a major bright spot as the global industry struggles to recover from a steep downturn.

But car sales in China have started to show signs of slowdown beginning from the second quarter as Beijing presses the brake to keep the economy from overheating.

Despite a strong market rebound in August, many senior industry executives expect car sales in the country to return to a more rational growth pattern with annual sales increase of 15-25 percent in the foreseeable future.

The China market, however, would remain a major focus for foreign automakers for many years to come given the country's low per capita car ownership, they say.

"Even 15 percent is still a very good growth. When you look at the European market, it's gigantic," PSA Peugeot's Olivier told Reuters.

"China will still be our major focus for many years and vast exports from China is unlikely until the market really starts to cool down."

(Reporting by Fang Yan and Ken Wills; Editing by David Fox)

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