Ford, Volvo To Invest $11.6B In Chinese Operations

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on April 05 2012 11:22 AM
Ford B-Max with SYNC
Ford and Volvo plan to increase output and market share in Asia via China with $11.6 billion in investments. REUTERS

China's auto industry will enjoy an $11.6 billion investment boost in the coming year, as Ford (NYSE: F) and Volvo try to increase output and market share in the world's second-biggest economy.

China's market for passenger and commercial vehicles totaled 18 million, according to the Wall Street Journal, though sales growth has slowed to a trickle, from 46 percent in 2009 to a scant 2.5 percent last year. Still, automakers are betting growth will continue its strong trends throughout the remainder of the decade.

Swedish auto maker Volvo, owned by China's Zhejiang Geely Holding Group Co., will invest $11 billion in new vehicles and manufacturing to reach a 20 percent share of China's auto market by 2015, according to Reuters. The company hopes to increase Chinese deliveries to 200,000 by 2014, with parent company Geely developing a premium brand exclusively for China.

Ford, America's second-largest auto manufacturer, will roll out plans as early as Thursday to invest $600 million in the Chinese city of Chongqing. The investment would make it the Dearborn, Mich.-based company's major manufacturing hub for passenger cars outside the U.S., as it tries to double its manufacturing output and sales in China to more than 1.3 million vehicles by 2020.

Head of Ford China Dave Schoch is expected to announce the plans with Chinese partner Chongqing Changan Automobile Co. in Chongqing on Thursday, after already receiving government approval. The duo already produces Ford Fiesta models in Nanjing.

Ford and Chongqing Changan Automobile Co. (CCA), its Chinese partner, plan to increase capacity at a plant in Chongqing to 250,000 cars a year, with a second line that will double production by 2014. Ford, which already produces the Fiesta with CCA in Nanjing, will introduce 15 new models to the market and double its number of dealers by 2015 as well.

The company aims to increase overall passenger car capacity by about 350,000 to 770,000 vehicles a year by 2014, Joe Hinrichs, Ford's president for Asica-Pacific and Africa told the Journal. Ford sits behind General Motors and Volkswagen for market share in China, selling about 519,000 vehicles there last year, one-fifth of GM's sales volume.

We have those great new products coming, which we know are going to be well-received in the marketplace, Hinrichs said in an interview with in an interview with the Journal, adding the shrinking growth rate is not a concern. Most people in the industry also think we'll get to 30 to 40 million [vehicles] by the end of the decade.

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