Ford looks for salvation in China with new SUV model

Bloomberg

With the future of Ford Motor Co.’s lagging luxury line riding on China, the automaker will expand its bet on the market by building a new Lincoln sport utility vehicle in the country in late 2019.
The still-unnamed SUV would expand Ford’s foothold in one of the hottest segments in China, a country Chief Executive Officer Mark Fields has said could be Lincoln’s largest market by the end of the decade. It will be produced with joint-venture partner Changan Automobile Group in the city of Chongqing.
Ford has been pouring $2.5 billion into overhauling Lincoln with new models such as the Continental flagship sedan, which helped boost sales in the US by 10 percent last year following decades of decline. But its salvation may lay outside North America. Ford has said its research shows the Lincoln name — dogged in the US by years of work as an airport shuttle — holds enough cachet in China to rival local leaders such as Audi. “China is incredibly important to Lincoln,” said Michelle Krebs, a senior analyst with car-shopping website Autotrader.com. “They have shown they can do fairly well there and that it holds great potential.”
Lincoln entered the Chinese market just two years ago. By the end of 2016, it had 65 dealerships and sales tripled to 32,558 cars and SUVs, almost one third of the brand’s US sales total.

IMPORT RELIEF
By building in China, Lincoln will avoid 25 percent in customs taxes the country imposes on imported vehicles. The duties drive up the cost of models such as the Navigator SUV, which starts at 988,800 yuan ($143,000), more than twice its US price. A redesigned version of the Navigator, Lincoln’s most recognizable nameplate in China, will be introduced at the New York auto show next month and arrive in showrooms this year.
A Ford spokeswoman declined to comment on plans for more Lincoln models to be built in China, or on how much the company will invest to produce the brand locally. Ford is joining the ranks of luxury carmakers including BMW AG, Daimler AG’s Mercedes-Benz and Volkswagen AG’s Audi that are already manufacturing models in China. Among premium auto brands, the only major ones not producing in China are Toyota Motor Corp.’s Lexus and Hyundai Motor Co.’s Genesis.
“Makers of entry-level luxury cars have to localize production otherwise they couldn’t compete with rivals that have done so,” said Yale Zhang, managing director at researcher Autoforesight Shanghai Co. “It is only natural for Lincoln to start production in China after several years of stable growth.”
Ford will continue to import Lincoln vehicles from North America, including the Continental sedan introduced last year, the company said.
SUV DEMAND
By choosing an SUV as its first locally produced model, Lincoln is banking on China’s love affair with spacious vehicles. Annual sales of 30,000 to 50,000 vehicles is commonly regarded as the threshold for local production in China, according to Zhang at Autoforesight.
Nissan Motor Co. started producing its upscale Infiniti marque in the country in November 2014. Sales rose to a record 41,590 units last year. General Motors Co.’s Cadillac brand topped 100,000 units for the first time in 2016, after beginning production in 2006.
Hyundai has said it’s deciding on options and timing to build its fledgling Genesis cars in China. Toyota remains a holdout among global automakers in terms of manufacturing the Lexus in China, citing quality concerns.