motoring news

Ford’s Signal to the Auto World: Here Comes China – The Fresh York Times

Ford’s Signal to the Auto World: Here Comes China

HONG KONG — After years of predictions that cars sold in the West would bear the “Made in China” label, the time has eventually come.

Ford Motor’s plans to build its popular Concentrate compact cars in China, rather than Michigan or Mexico, is a milestone in China’s automotive rise. Chinese auto industry leaders praised the stir as long-awaited confirmation that the country’s factories have become as efficient and high-quality as those in the United States and Europe.

The question now is how political leaders greet the development, amid rising skepticism in the United States over Chinese trade policies and the benefits of free trade in general. However the White House so far has been muted in its reaction to Ford’s stir, President Trump in particular was strongly critical of Chinese trade policies during his campaign last year. China’s high tariffs on imported cars and auto parts have already emerged as a potential trade issue.

“Ford’s moving production to China shows China’s competitiveness in manufacturing is continuously enhancing and our industrial supply chain is improving,” said Cui Dongshu, the secretary general of the China Passenger Car Association, a government-backed trade group in Beijing. “But this is obviously against Trump’s policies — it is fairly complicated and may cause some friction in Sino-American trade in the future.”

China represents a competitive challenge and a profitable chance for American carmakers.

China is already the world’s largest automaker, with annual car production toughly equal to that of the United States and Japan combined. Chinese players have long desired to develop underused factories dotting major cities to increase production and export the excess.

For years, it has been a quixotic desire. Such factories tend to churn out lower-quality, domestic-brand rails that would not pass muster with American or European consumers.

But China is angling for a big share of the future. Beijing has put very strong pressure on Western automakers to transfer their latest, most cutting-edge technology to China as a condition of doing business. Many companies, including Volkswagen, General Motors and Ford, have plans to shift more research and development to China, particularly around electrical cars.

China has an increasingly global auto presence. General Motors began exporting the Buick Envision compact sport utility vehicle to the United States last year, albeit the Envision is a much lower-volume model than the Concentrate. Volvo, which is wielded by a Chinese company, commenced exporting S60 sedans from China to the United States in 2015, while Cadillac this spring began shipping its Shanghai-made CT6 Plug-in hybrid to the United States.

Ford’s decision will significantly ramp up the country’s car exports. The Concentrate would more than triple China’s exports of fully built cars to the United States.

As a manufacturing base, China holds strong appeal for Detroit’s automakers. Auto factory pay in China is similar or slightly higher than in Mexico at around $1,250 a month, including government-mandated benefits like contributions to savings funds with which workers can buy housing. Overtime adds toughly $300 a month. But that pay is much lower than in the United States, where workers earn several times as much even before overtime.

Newsletter Sign Up

Thank you for subscribing.

An error has occurred. Please attempt again later.

You are already subscribed to this email.

• See Sample
• Manage Email Preferences
• Not you?
• Privacy Policy
• Opt out or contact us anytime

Auto parts are also much cheaper in China than in the United States, because labor tends to be a larger share of the cost than final assembly. The global auto parts industry has shifted much of its production to China, partly because of low costs and partly because China’s steep tariffs make it unlikely for multinational manufacturers to challenge in the Chinese market unless they produce in China.

And quality is high at Chinese factories run by Western carmakers.

Global automakers already have built some of their most modern factories in China. A Ford factory in Hangzhou has six hundred fifty robots. A somewhat smaller General Motors factory in Shanghai has five hundred thirty robots that make Cadillacs with all-aluminum figures — one of the latest and harshest manufacturing challenges even in the West.

G.M.’s China-made Buick Envision ranks slightly above average in initial quality surveys of American consumers among thirteen compact sport utility vehicles, according to J.D. Power and Associates, the international quality rating company. The top three concerns of the Envision’s American buyers involved the ease of use of its voice recognition system and other consumer electronics — concerns indicating that American consumers were basically pleased with the actual car.

Chinese domestic automakers still lag in quality surveys. But among the global brands, cars made in China come from assembly lines that are identical in almost every respect to factories in the West — except that the factories in China, because they are fresh, tend to be more automated. Jeff Cai, the general manager of the China automotive practice at J.D. Power, said that the relative newness of Chinese factories tended to balance out the limited practice and high turnover of Chinese workers.

“In terms of the building quality,” he said, “it’s pretty similar.”

Industry insiders fear that all the auto factory capacity will encourage China to increase exports if homegrown request slows down. Thanks to a cut in sales taxes last year, car sales in China in two thousand sixteen grew by an amount almost equal to the entire Japanese market. That helped absorb some of China’s overcapacity. But with the partial expiration early this year of the sales tax cut, request is kicking off to slow.

Ford’s sales in China in the very first five months of this year were down eleven percent from the same period last year. But Sinead Phipps, a Ford spokeswoman, denied any connection to the fresh export plans. “We’ve made the decision because it permits us to reduce global Concentrate production by one plant, improve the health of our Concentrate business, save $1 billion in investment costs and further improve our scale in China,” she said.

The Chinese government is so worried about overcapacity that in June it tightened the approval process for any further auto assembly plants. But automakers are still rushing partially built factories to completion.

Ford’s decision could shift work away from American auto parts factories, which are strenuously concentrated in Ohio, Indiana and southern Michigan. The Concentrate made in Michigan presently has forty percent of its parts manufactured in the United States and another twenty six percent in Mexico, where business activity tends to involve a lot of materials imported from the United States. By contrast, United States government data shows that only two percent of the Envision’s parts come from the United States.

Ford was a relative laggard in China compared with G.M. for many years. Today, it is increasingly part of an industry shift across the Pacific to China. Shortly before he was substituted last month as Ford’s chief executive, Mark Fields said in Shanghai, “You can see from our series of announcements, we are not holding back.”

Go after Keith Bradsher on Twitter, @KeithBradsher

Ailin Tang contributed research from Shanghai.

A version of this article emerges in print on June 22, 2017, on Page B2 of the Fresh York edition with the headline: Ford’s Plans Send Signal: Chinese Cars Are Ready to Rival on World Stage. Order Reprints | Today’s Paper | Subscribe

We’re interested in your feedback on this page. Tell us what you think.

Related movie:

---