Ford Motor Company (NYSE:F) To Increase Production In China

Lincoln will build the cars in China, the largest market in the world for vehicles, with a view to blunting the effects of trade spats between the world top two economies. Additionally, Ford will manufacture a new SUV for the Chinese market by the close of next year. Beyond that, however, Ford has not revealed its future production plans with regards to the Lincoln brand.

“Our localization plans to support the China market are on track and will serve to further drive Lincoln’s growth in China. Beyond that, it would be premature to discuss our future product and production plans or timing,” said a spokesperson for the Lincoln brand, Angie Kozleski.

Lincoln Aviator

According to sources who spoke with Reuters, Ford expects to start the production of a new Lincoln Aviator vehicle in China late next year or early 2020. This will be done alongside replacements for other brands such as the MKZ sedan and the MKC crossover. In 2021 production of the new Nautilus is expected to start and this is expected to serve as a replacement of the Lincoln MKX. The production of the fifth model which will be a crossover resembling a small coupe is expected to start in 2022.

The Dearborn, Michigan-based auto manufacturer has a lot to lose should the trade spat between the United States and China progress into a full-blown trade war. In 2017 Ford shipped around 80,000 cars manufactured in North America to China. Over 50% of these cars were Lincolns. Currently, all the Lincoln cars that are sold in China by Ford are made in North America.

Import tariff

Though China has indicated that it could reduce the 25% tariff it imposes on vehicle imports, there are no guarantees that the move would result in a large sustainable rise in the number of Lincolns and Fords made in the United States being shipped to China. The long-term plans of Ford are to manufacture more cars in the world’s most populous country in order to serve a market which is now roughly 60% bigger than the market in the United States.

Ford is, however, trailing domestic rival General Motors as well as luxury brands from Germany such as Mercedes-Benz, BMW, and Audi which have made heavy investments in China in order to protect themselves from currency, political and trade gyrations as well as to reduce the price points of their premium vehicles.

Behind rivals

Last year the total number of cars imported to China rose to 1.2 million but that figure is less than 5% of all the vehicles that were sold in the world’s second-largest economy according to  China Automobile Dealers Association figures. Less than 25% of the vehicles that China imported, about 267,000 were from the United States per Statista.

With a tariff rate of 25%, the American premium brands of Ford cannot compete effectively with Germany’s luxury brands as well as GM’s Cadillac since they are built locally in China and thus avoid the tax.