Budget buyers to boost China car sales

Automakers will race to appeal to budget-conscious Chinese car buyers as the industry expands beyond the wealthy coastal cities in the east, Ford Motor Co's Asia chief said on May 8.

As they expand more heavily into central and western China, automakers can appeal to price-sensitive consumers by offering multiple vehicles within the same size segment at varying prices, Joe Hinrichs said.

"The growth expected the rest of this decade in China is largely to come from the central and western parts of the country which is more value-oriented," he told reporters at Ford's headquarters in Dearborn, Michigan.

"You'll need to serve those customers differently," he added.

Ford's plan to introduce 15 new vehicles in China by 2015 began with last month's launch of the new Focus. Hinrichs said last month in Beijing that Ford plans to sell cars priced below the Fiesta, currently their cheapest model in Asia with a price ranging from $12,300 to $17,500.

Ford sales in China rose 24 percent in April to 54,881 vehicles, spurred by strong demand for the Focus.

Ford makes the Fiesta, Focus, Mondeo and other vehicles in China in a three-way tie-up with Chongqing Automobile Co Ltd and Japan's Mazda Motor Corp .

Hinrichs said Ford has to be patient as it awaits approval from Chinese officials for the unwinding of Mazda from that joint venture, called Changan Ford Mazda Automotive Ltd. He said Ford expects the move to be approved, but did not predict when that would occur.

He declined to say if the new venture would be a 50-50 split with Chongqing. Currently, Chongqing owns 50 percent, Ford 35 percent and Mazda 15 percent of Changan.

In 2009, sales of autos in China grew by nearly 50 percent, a growth rate that slowed to about 2.5 percent by 2011, when 18.5 million new vehicles were sold.

Ford expects new-vehicle sales to rise about 5 percent this year and hit 30 million by 2020.

The highest expected growth is in the central and western regions of China in part because of limits on the number of driver's licenses allowed to be issued in the more established markets in the eastern part of China, Ford has said.

Ford and its rivals must decide whether to compete with low-cost models sold by local brands, Hinrichs said.

In China, the average passenger car is sold for about $13,000 to $14,000. In India, that figure is about $7,000 to $8,000. Ford competes in the lower-priced India market by offering cars that have less content, including less technology and less refined interiors.

He said if Ford enters some lower-end markets, it would not dilute the Ford brand.

"I don't personally see any risk to the brand going more downward in the market because that's where the growth is and in Asia-Pacific, you've got to play there," Hinrichs said. "That's where the volume is."

Hinrichs said the company's global platforms will make it easier for the company to introduce cars priced below the Fiesta. When the Fiesta was introduced, it allowed Ford to expand its market shares throughout Asia-Pacific, he said.