Why Ford Is Falling Behind In China

Why Ford Is Falling Behind In China

American cars are struggling in China
and it may only get tougher. U.S. automakers. Shares of 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
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 mean 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 fifty-fifty 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 model 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. Whereas Ford sold roughly 750
2000 cars in China in 2018, GM sold more than 3.6 million. Ford’s share of the Chinese market
has not cracked more than 5 percent since 2008, and the company
has actually lost shares since 2015 from a high of 4.7 percent of the market to 2.9 percent in 2018. GM also lost shares since 2015, but
still had a much larger 13.8 percent share of the market in 2018. Aside from the benefit of a solid
head start, GM also enjoys some rather unlikely prestige in China. 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. 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. 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 percent from 10.7 percent 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 percent from 21.6 and Japanese automakers rose to 21.7 percent from 18.3 percent. A 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.. 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. 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. One potential for tremendous growth
is 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 vehicle. 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 twenty eighteen. About 95 percent 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. Ford’s first BEV in China,
which launched in summer 2019. 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 electrics 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. 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. 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 percent tariff on
all imported pickups. Long term survival is not only
essential to American automakers in China, but in the United States as well. There are already well over 100 Chinese
companies setting up some kind of research operation in the United States
as Chinese carmakers become more skilled at competing in
their own market. They’re going to begin looking for places
around the world to unload all of the cars they are
now capable of making.

100 Replies to “Why Ford Is Falling Behind In China

  1. Chinese car makers making a comeback in Brazil. A former Ford Motors Auto Plant in São Bernardo do Campo ( where the VW plant is still open ) is being touted around to Chinese carmakers. Ford is left with one plant in the country, and once had three. GM still sells as their product line up is relatively affordable. Jeep sells out of the strength of the FIAT dealership body.

    American car makers are in retreat the world over, pure and simple. To many compounded mistakes throughout the years. Henry Ford would roll in the grave as to how poorly managed his operations have become.

    Chery, , a Chinese Car Brand , once for dead on its first attempt , is getting a resurgence through a joint venture with a local industrialist, the same who partnered with Hyundai, a few years back. Loads of money being pumped into advertising , a boost on its dealership body, a promise to improve product quality and spares availability, and a revamped product line up.

    Americans will be steamrolled if they do not commit to the country. Which is pivotal on South America and once did wonders in low margin markets such as Middle East and Africa ( the VW Passat comes to mind ).

  2. American corps and medias are biggest jokers in the world. " Our bussineses ( such as Apple) are going down hill because the Chinese not buying our products", Trump :" we re having a war ( trade war) with the Chinese, we are not allow others to ahead us in any circumstances.

  3. i would never buy american goods anyway, their price is too expensive especially in south east asian region, wich is where i live

  4. Do your own thing and stop comparing with the communist China. The more you mention China, the more power you grand them them. China is a totalitarian regime, the US auto makers and other companies should have never gone to China to do business. If you trust the communist, you deserve the results. I have stop buying products made in China for 30 years.

  5. I am a Chinese, I own a Ford Focus for 9 years. I won't buy another Ford since there is no exciting Ford car in China market. Prefer a Benz or BMW

  6. Never trust China. China will always blindfold, tie your hands behind your back, make you hop on one foot if you're a non domestic entity. They will bald face lie to you're face and arbitrarily change the rules anytime it suits them.
    They have stolen practically all of their manufacturing production methods and technology from Western companies. Granted, the Western companies could have done a better job of protecting their proprietary assets.
    Orange man bad, but orange man is the only President that has confronted the obvious trade problems, whereas all b4 him continued to sell America down the river..

  7. All American cars ever do is FAIL EVERYWHERE……….I wonder WHEN they were ever succeeding. Scotty Kilmer needs to watch this video.

  8. The real reason is people still want to buy cars but ……..
    Because of overpopulation in the big cities the government has put in restrictions to get people to share rides or use public transport etc. the western media doesn't really understand and in fact get things wrong all the time about China. For instance you can buy a car easy but to have it registered takes literally a lottery. And then you can only drive on certain days of the week with certain registrations. The western media really needs to do more research before presenting these misleading vids about China.

  9. Japanese and german automobiles outperformed americans cars.

    Sadly they are not reliable. The only reason why american cars still exist is becuase of patriotism.

  10. Only reason ford still exist is pickup trucks, and even then they are the apple of pickup makers. Their trucks sell for the highest margins and have the lowest quality. So Ford struggling to survive in a market where pickup trucks aren't best sellers and especially with the 25% tariffs, should be a surprise to no one.

  11. Duh… Your country is creating trouble in their country. And you are asking why your company is having trouble selling over there?

  12. fake news. Murican cars have made BILLIONS already in China in the past. Not struggling at all. The CEOs and shareholders all have profited. Slower sales doesn't mean they are struggling. If they were truly struggling, they'd be bankrupt already.

  13. Close to the end you mentioned what I think is the real reason – China is promoting electrification in order to reduce local air pollution in China and to reduce global carbon emissions . American manufacturers, with the exception of Tesla – who, as you noted, is the only manufacturer who didn’t have to form a JV – are trying to flog old technology in a society that is – like it or not – overall more technologically advanced than USA. Hollywood and history will only get you so far. China will be writing a large part of the automobile history from now on.

  14. Ford in typical fashion is behind the 8ball…however there is something to be said for not being the trend setter and studying a market and entering purposefully over time.

  15. 1:12–1:22 Translation: " We will let you sell your cars here if you give our companies a chance to steal your secrets."

  16. well, one of the statistics quoted that volume of ford 2018 in China was wrong, the number of 750k was suppose the number of 2017, and the really number in 2018 was only 325k, should pay more attention next time

  17. It’s a shame that all these American companies are tripping over themselves trying to make a profit. China will take over the world soon cause of American greed

  18. Why US car manufacturers are losing market share? The United States lives in the past and the rest of the world is quietly overtaking with new and better cars etc.

  19. Reason 1, because of their partner Changan automobile, poor build quality, bad marketing, bad management etc.
    Reason 2, think how the American car market will become with Japan and Korean companies if there's no government protection.

  20. In India, Ford sold controlling stakes of their business to Mahindra few months back.
    That was a strategic move in my opinion.

  21. The only reason that german cars have more chairs than japanes cars is that china and japan hate each oter for world war 2 … but american crap …i mean cars are just trash compared to other cars …Tesla and chines elecktric cars are way better than most cars buick is the cheap and bad made opel and the reason opel wasn't allowed in china …

    I mean china is producing all phones and pc 's for years and they know how to make things so if they develope something they keep the patents i now america dosn't respect patents owned by non american companies … the day we get rid of GM and Ford i will celebrate …and no bailout will rescue these 2

  22. It is because Chinese customers are getting wise with their money. No sane person will spend their hard earn cash on a garbage car called FORD ?

  23. I suggest everyone to use products from their own country and other countries except China.

    China copies your countrys product then kicks your countrys companies out of the country. Its selfish and copy cat

  24. More like american car strugling everywhere ?
    Ford and. Chevrolet already give up on my country and many of asia country

  25. Ford territory is a Australian design FWD. Maybe they could create a special edition Ford territory Kakadu or something like that.. similar to how Toyota has a landcruiser Sahara edition..

  26. China is the most unfair market in the world, if you have to give up 51% of your company & all IP just to be in china! companies in china have to give up their secrets so than china can just make their own ford named bord. The world should treat china the same way

  27. Who cares about China….I don't care if they like any of our products, I don't care if they like western culture, I don't care if they hate everything about us. They are the ones with concentration camps where they harvest organs from people who are alive. Screw China.

  28. Come on man, Ford made a killing of revenue in China these years. They sold Ford Escape averagely 40,000 units each year before Trump's stupid trade war.

  29. Happy Holidays everyone
    all across the china, GM engine start
    run for 2 year, then fawr apart

    Mechanical problem, One child policy
    should have worn a condom,

    Dashboard light Christmas tree

  30. Happy Holidays everyone
    all across the china, GM engine start
    run for 2 year, then fawr apart

    Mechanical problem, One child policy
    should have worn a condom,

    Dashboard light Christmas tree

  31. Happy Holidays everyone
    all across the china, GM engine start
    run for 2 year, then fawr apart

    Mechanical problem, One child policy
    should have worn a condom,

    Dashboard light Christmas tree

  32. Happy Holidays everyone
    all across the china, GM engine start
    run for 2 year, then fawr apart

    Mechanical problem, One child policy
    should have worn a condom,

    Dashboard light Christmas tree

  33. They should make Chinese companies sign a mandatory 50/50 agreement with U.S companies, then copy all the chinese designs, just to make things fair.

  34. CNBC, I'm dissappointed at your journalism.

    When Chinese customers are patriotic, they are defined as 'stubborn'.

    But when American customer are patriotic, they are defined as pride and glamour.

    Where is your duty of ethical journalism?

  35. Why haven’t they mentioned why GM is dead in most parts of the world! Europe Asia!

    Opel Holden India South African etc etc

  36. American cars couldn't compete with German cars.
    American cars only barely competed with Japanese cars.
    Then the Koreans joined the car industry
    Now the Chinese are joining the car industry.

    And America doesn't have the greatest track record of car manufacturing.

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