Ford speeds up China sales network expansion

BEIJING Wed Nov 24, 2010 10:00pm EST

BEIJING (Reuters) - Ford Motor (F.N), expecting record sales in China this year, is adding 100 dealers to its network, mostly in inland cities that are replacing big, coastal regions as the major growth driver in the world's largest auto market.

The move, more aggressive than a previously announced scheme, will bring the number of its dealers in China to 340 by the end of the year, said Joe Hinrichs, president for Ford's Asia and Africa operations, up from the original target of 310.

"We did a pretty thorough study and looked at where our opportunities were and decided we need to be more aggressive," Hinrichs told Reuters in a phone interview on Thursday, adding that more dealers will open for business in 2011.

As China's national wealth grows, smaller cities in the north and west are becoming increasingly important for foreign automakers that already dominate big, coastal cities.

Vehicle sales in tier 3 and tier 2 markets jumped 67.7 percent and 56.5 percent, respectively, in 2009, compared with a 42.6 percent increase in tier 1 cities, according to Xu Changming, a senior industry researcher at the State Information Center.

Ford's Fiesta, priced between 78,000 yuan and 110,000 yuan ($11,700-16,600), are selling extremely well in smaller cities where people tend to be more price-sensitive.

Other global players are also making a push toward inland China.

GM's mini-vehicle venture in southern China rolled out the Baojun 630 sedan this week, while Nissan Motor (7201.T) and its partner, Dongfeng Motor Group (0486.HK), also unveiled a joint venture brand, Venucia.

Hinrichs said Ford can compete effectively in different market segments, adding the automaker would introduce a number of new products in China in the coming years.

Jiangling Motors Corp 000550.SZ, which makes both JMC light commercial vehicles and Ford's Transit, also complements Ford's China portfolio, he added.

"We are watching very closely in the Chinese industry what's happening with the proliferation of brands," he said. "With more and more new brands being introduced all the time. We want to focus our attention and energy on the Ford brand."

CHINA MARKET

Ford, the only U.S. automaker to have steered clear of a U.S. government bailout and bankruptcy in 2009, is a relatively late- comer in China, where GM and Volkswagen AG (VOWG.DE) have built up a lead.

But Ford has been accelerating its expansion. It is building a green field car plant and engine plant with partners Chongqing Changan Automobile Co 000625.SZ and Mazda (7261.T). Jianling Motor, 30 percent owned by Ford, is also adding a $300 million new facility.

In the first 10 months, Ford and its partners sold 468,754 vehicles in China, up 39 percent from a year earlier, outperforming a 34.8 percent gain of the overall China market.

By comparison, Toyota (7203.T) the world's top automaker, sold 643,599 units in the same period, up 17 percent on the year.

Hinrichs said Ford will have a "record year" in China this year but declined to be specific.

China has been a bright spot amid a global industry still recovering from a steep downturn. But many industry insiders expect the market to return to a slower but more typical pattern next year after breakneck growth in 2009 and the first quarter of this year.

Hinrichs shared the view but was reluctant to speculate on market outlook for 2011.

"The fourth quarter of this year, right now, looks very strong. So we're going have to watch it quarter by quarter and see how it goes because most predictions so far about the auto industry in China have been wrong."

(Reporting by Fang Yan and Ken Wills)

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