How Ford Is Falling Behind In China
Why Ford falling behind the Chinese market, and how Electric vehicle business was growing in the United states. GM Battle.
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| How Ford Is Falling Behind In China |
American cars are struggling in China and it may only get tougher.
U.S. automakers shares of the Chinese auto market have fallen and companies have scrambled to shore up their businesses in the largest car market in the world.
One firm that is especially seen in its share of troubles is Ford. Its rival, General Motors, is the second-largest in sales in China behind German giant Volkswagen.
A late arrival, a less than ideal partnership and difficulty keeping up with the rapid pace of the fast-growing and a highly competitive.
Chinese market have all left Ford in the dust behind its larger rivals. But the blue oval seems determined to succeed.
The company said earlier in 2019 it has a plan to catch up to its competitors and to be fair to Ford, things are now tough for everyone in China.
Intense competition, the rise of Chinese brands in a slowing market means the good days for foreign automakers may have come to an end, even as Chinese companies plant stakes in the United States.
In the later decades of the 20th century, China began opening up its domestic automotive market to foreign companies on the condition that they form 50/50 partnerships with Chinese firms.
Up to that point, domestic companies had ruled the Chinese market and they tended to focus on commercial trucks.
But there were a few foreign manufacturers who sold cars in the country in low volumes.
Toyota, for example, had begun marketing its Crown sedan in 1964. One of the first international companies to establish a meaningful business in China was the German company Volkswagen.
The company signed an assembly contract in 1982 with the Shanghai Automobile and Tractor Company, at that time, the largest Chinese vehicle manufacturer.
Around the same time, French brand Peugeot and American brand Jeep also set up joint venture partnerships in China. Other similar agreements came later.
But with the exception of the Jeep partnership, Japanese and European automakers tended to dominate among foreign brands working in China.
The biggest American player in China is General Motors, which won a battle with its arch-rival Ford, over a partnership with China's Shanghai Automotive Industry Corporation in the mid-1990s.
GM has been partnered with the firm. Ever since Ford later joined together with Changan another state-owned Chinese manufacturer.
And that relationship has been considered a source of strain for Ford in the country.
GM At one point I thought they were late to the game, but they caught up very quickly.
Volkswagen was was in really early and became a very well known foreign nameplate really fast and then GM caught up with them basically.
GM and Volkswagen have been the market leaders for quite some time.
Ford was late to the party. Ford came in and to be frank about it, their joint venture partner, Changan, was not quite at the level of the joint venture partners that Volkswagen and GM had in terms of sophistication and government power and influence and things like that.
And so Ford had some disadvantages out of the gate.
In addition, Ford and its partner have had difficulty in the past keeping up with the rapidly changing new car market.
Fashions change enormously. One year, some models of Volkswagen will be the one that everyone wants.
And then the next year it'll be a Buick that everyone wants. And to some extent it's regional, but it's also very quickly changing.
The Chinese auto market is super competitive. China is far and away the most crowded market in the world with cash.
More than 80 brands vying for market share. That's all of your global brands from Europe, Korea, Japan, United States.
In addition to dozens of Chinese brands so, to get your brand to stand out really takes a lot of hard work.
Volkswagen is the largest automotive presence in China but GM is number two and it has a far larger presence in the country than its smaller American rival.
The company said earlier in 2019 it has a plan to catch up to its competitors and to be fair to Ford, things are now tough for everyone in China.
Intense competition, the rise of Chinese brands in a slowing market means the good days for foreign automakers may have come to an end, even as Chinese companies plant stakes in the United States.
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| How Ford Is Falling Behind In China |
The Chinese Car Market
In the later decades of the 20th century, China began opening up its domestic automotive market to foreign companies on the condition that they form 50/50 partnerships with Chinese firms.
Up to that point, domestic companies had ruled the Chinese market and they tended to focus on commercial trucks.
But there were a few foreign manufacturers who sold cars in the country in low volumes.
Toyota, for example, had begun marketing its Crown sedan in 1964. One of the first international companies to establish a meaningful business in China was the German company Volkswagen.
The company signed an assembly contract in 1982 with the Shanghai Automobile and Tractor Company, at that time, the largest Chinese vehicle manufacturer.
Around the same time, French brand Peugeot and American brand Jeep also set up joint venture partnerships in China. Other similar agreements came later.
But with the exception of the Jeep partnership, Japanese and European automakers tended to dominate among foreign brands working in China.
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| How Ford Is Falling Behind In China |
Ford and GM Battle For China
The biggest American player in China is General Motors, which won a battle with its arch-rival Ford, over a partnership with China's Shanghai Automotive Industry Corporation in the mid-1990s.
GM has been partnered with the firm. Ever since Ford later joined together with Changan another state-owned Chinese manufacturer.
And that relationship has been considered a source of strain for Ford in the country.
GM At one point I thought they were late to the game, but they caught up very quickly.
Volkswagen was was in really early and became a very well known foreign nameplate really fast and then GM caught up with them basically.
GM and Volkswagen have been the market leaders for quite some time.
Ford was late to the party. Ford came in and to be frank about it, their joint venture partner, Changan, was not quite at the level of the joint venture partners that Volkswagen and GM had in terms of sophistication and government power and influence and things like that.
And so Ford had some disadvantages out of the gate.
In addition, Ford and its partner have had difficulty in the past keeping up with the rapidly changing new car market.
Fashions change enormously. One year, some models of Volkswagen will be the one that everyone wants.
And then the next year it'll be a Buick that everyone wants. And to some extent it's regional, but it's also very quickly changing.
The Chinese auto market is super competitive. China is far and away the most crowded market in the world with cash.
More than 80 brands vying for market share. That's all of your global brands from Europe, Korea, Japan, United States.
In addition to dozens of Chinese brands so, to get your brand to stand out really takes a lot of hard work.
Volkswagen is the largest automotive presence in China but GM is number two and it has a far larger presence in the country than its smaller American rival.
Vehicles Sold in China:
- Whereas Ford sold roughly 750 2000 cars in China in 2018, GM sold more than 3.6 million.
Auto Industry Market Share in China
- Ford's share of the Chinese market has not cracked more than 5 % since 2008, and the company has actually lost shares since 2015 from a high of 4.7 % of the market to 2.9 % in 2018.
GM also lost shares since 2015, but still had a much larger 13.8 % share of the market in 2018.
Aside from the benefit of a solid head start, GM also enjoys some rather unlikely prestige in China.
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| How Ford Is Falling Behind In China |
Buick Premium Sedan Brand
Its Buick brand long and often stereotyped back home as an old fashioned purveyor of sedans and wagons for grandparents is in China considered an elite, almost premium brand.
Buick was the first American brand GM introduced in China when it partnered with SAIC, in large part due to the pedigree the brand had in the country.
Buick has a long history in China. It was the car that ferried famous Chinese figures such as Sun Yat-sen, commonly regarded as one of the founding fathers of modern China, and Zhou Enlai, the first Premier of the People's Republic of China.
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| How Ford Is Falling Behind In China |
Trouble For Foreign Brands
To be fair to Ford, it hasn't been terribly easy for any of the three Detroit automakers in China in recent months as slowing economic growth has dented consumer demand.
Things really began to slow in 2015 and automakers for the first time needed to discount their prices in order to stimulate growth in the car market.
Then by 2018, even discounting wasn't doing the trick and we started to see actual declines in demand for the first time in memory.
I mean, you'd have to go back to the early 90s to find a time when the market was not roaring back with declining.
And that's where we are right now on the 16th straight month of declines.
In the first eight months of 2019, U.S. automakers share of Chinese passenger vehicle sales fell to 9.5 % from 10.7 % during the same period of 2018, according to data from the China Association of Automobile Manufacturers.
During that same time, German carmakers share rose to 23.8 % from 21.6 and Japanese automakers rose to 21.7 % from 18.3 %.
Global trade war has also created headaches for companies and fed risk aversion among Chinese consumers, according to industry watchers.
President Donald Trump has lashed out at GM on Twitter about its Chinese manufacturing footprint. The automaker cited the trade war as a potential risk to its business in China in its 2018 annual report.
The trade dispute has affected Ford's business as well. The automaker has said the trade war has raised the costs of its vehicles in China and led the companies to cancel plans to import its Focus crossover from China to the U.S.
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| How Ford Is Falling Behind In China |
The Future Of China's Car Market
There are reasons to be optimistic about the future of foreign automakers in the country.
China is lifting certain restrictions on foreign companies that could give them more control over their operations in the country and a greater share of the cash they make.
BMW became the first automaker to buy out a majority share of its JV partnership, BMW Brilliance.
Tesla has also managed to set up shop in China without any JV arrangement at all, something many people who watch the industry consider astounding.
Decoupling from a Chinese partner could mean a higher share of profits.
But it remains to be seen how easy such a situation will be to manage, though joint ventures have been required by law. Chinese auto industry watchers say they also serve a practical purpose.
The government is so heavily involved in business in China that having a partnership with a state-owned company smooths out processes that could otherwise be unmanageable for a foreign operator trying to go it alone.
While sales have slowed in recent months, there are still millions of untapped Chinese customers out there.
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| How Ford Is Falling Behind In China |
Electric Vehicles Business
One potential for tremendous growth in China's electric vehicle market, which the government has been keen to promote both for the sake of reducing China's tremendous pollution problem and for the purpose of turning Chinese business into a global leader in electric vehicle technology.
Electric vehicles have changed the game because they are, by all accounts, much simpler to produce the drive.
Trains are very simple and electric vehicles. You have a lot of startups in the electric vehicle business that haven't been in the vehicle business before.
They're funded by the equivalent of a Facebook or an Amazon in China. Somebody with a lot of money, with a lot of high tech expertise and no tradition of producing vehicles whatsoever.
And they have entered the electric vehicle business
In 2018 About 95% of the domestic electric vehicle market was controlled by Chinese makers, but importers are beginning to introduce some of their own vehicles.
Ford and Jangling Motors jointly developed the Ford Territory Battery Electric Vehicle business. Ford's first BEV in China, which launched in summer 2019.
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| How Ford Is Falling Behind In China |
Ford's Innovations
Apart from that, Ford made some big moves in 2018 and 2019 to improve its business in the country.
The automaker spun its China business out of its Asia Pacific operations into a standalone entity and it appointed Anning Chen, president of the Ford China Group.
In April, the company launched its Ford China 2.0 initiative, which aims to give the automaker's business a shot in the arm.
Ford kicked off that move with an announcement that it will launch more than 30 new Ford and Lincoln vehicles over the next three years.
All of which will be tailored to Chinese consumers. More than 10 of them will be electric or hybrids.
Tailoring product to the market involves making changes that seem as subtle as changing the face of a vehicle for debuted its escape titanium for the Chinese market in April.
Ford sells the Escape in a titanium trim in the U.S., too, but the company put a different face on its Chinese version to appeal to Chinese customers.
At the time, Ford's vice president of global design said Chinese buyers prefer designs that are understated, yet powerful.
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| How Ford Is Falling Behind In China |
Baidu Intelligence Technology
Ford is also working on a China-specific version of its Sync infotainment system with artificial intelligence technology from Chinese tech giant Baidu.
The company created a center that will design vehicles suited to Chinese tastes and an innovation center that will develop mobility services and other products for the Chinese market.
The company is also starting to leverage China as a product research and development hub.
The automaker's Chinese partner, Changan Ford, will design and develop the next generation Ford Escort.
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| How Ford Is Falling Behind In China |
China Pickup Trucks
And recently, all three Detroit automakers also displayed pickup trucks, a Detroit staple at a Shanghai trade show in early November 2019.
Pickups are considered an extremely important product for U.S. automakers.
All three firms take great pride in their truck lineups and compete fiercely with one another, especially in their home market of North America.
Pickups are also a category in China that have been resistant to the recent slump in auto sales.
Of course, in China, American firms do not have the home-field advantage they have when selling trucks in the U.S., including customers reputed to be stubbornly patriotic and a long-standing 25 % tariff on all imported pickups.
Long term survival is not only essential to American automakers in China, but in the United States as well. So i think now we know how ford is falling behind in china.
There are already well over 100 Chinese companies setting up some kind of research operation in the United States.
Chinese carmakers become more skilled at competing in their own markets. They're going to begin looking for places around the world to unload all of the cars they are now capable of making.
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