EagleTribune.com, North Andover, MA

September 2, 2012

Ford to keep expanding in China with addition of luxury Lincolns

By David Pierson
Los Angeles Times

---- — BEIJING — Ford Motor Co. continued its China blitz last week, announcing that it would join the country’s increasingly competitive luxury-car segment by introducing Lincoln automobiles to the Chinese market by 2014.

The announcement came a day after Ford broke ground on its sixth factory in China, a $600 million plant in the southwestern city of Chongqing, and revealed that it had won initial regulatory approval to free itself from a local joint venture to manufacture cars with Mazda.

The developments allow the Dearborn, Mich., automaker to ramp up its ambitious expansion plans in China in an all-out effort to catch up with its far more popular foreign rivals, Volkswagen and General Motors Co.

“Lincoln is an important part of our plan, and introducing Lincoln in China marks the next step in our expansion in Asia and our commitment to serving customers in the luxury market,” said Ford CEO Alan Mulally, who is touring China.

Ford is a latecomer to China but has committed about $5 billion since 2006 to build factories, grow its vehicle lineup and expand its dealership network in the world’s second-largest economy.

Ford now sells an array of compact vehicles, sedans, SUVs and vans in China. Sales hit just over half a million units last year. Passenger vehicle sales have grown 7 percent this year, according to LMC Automotive, about 2 percent below the industry-wide rate of expansion.

With the introduction of Lincoln, the company hopes to tap a consumer segment that has been wildly successful for Audi, BMW and Mercedes-Benz. The three German automakers combine for almost 80 percent of the luxury-car market.

Unlike those brands, which manufacture in China, Ford will import the still-to-be-released Lincolns when they’re officially launched here in the second half of 2014. A new Lincoln MKZ sedan is to be launched in the U.S. this year, part of a revitalization plan to introduce several new vehicles to the brand’s lineup.

Ford said it’s considering the needs of Chinese consumers in designing the new Lincoln vehicles. The company consulted luxury fashion labels Prada and Burberry because of their experience with China’s rich. Spacious rear seats were deemed a must, as luxury-car owners in China tend to be chauffeured. The company is also betting Lincoln’s nearly 100-year-old history — one that includes many presidential limousines — will resonate in a country that prizes heritage brands.

“We have a chance to be different here,” said Jim Farley, Ford’s head of global marketing, “different from the Germans, the Asian brands, the other American brands, Cadillac. It’s a perfect time for Lincoln to come here because our DNA is different from all the other choices customers have.”

Ford estimates that luxury-car sales in China will more than double to 2.7 million units by 2020, surpassing the U.S. as the world’s top market. As a whole, China posted auto sales of 18.5 million last year, compared with 12.8 million in the U.S.

The strength of Chinese luxury auto sales today belies an industry-wide slowdown triggered by over-capacity, China’s weakening economic growth and stricter car-ownership restrictions in some of the country’s most congested cities, such as Beijing.

“The issue of over-capacity has really not affected the high end of the pyramid,” said Bill Russo, president of the Synergistics auto consultancy in Beijing and Chrysler’s former chief in China.

Still, Russo warned that Lincoln would have to find a way to stand out and justify its potentially hefty price tag with engineering performance and interior features.

“The degree of difficulty will be high,” Russo said. “You have a very established set of competitors in a market with Chinese consumers who already equate luxury with a certain portfolio. Getting them to recognize Lincoln is going to be the main challenge.”

Michael Dunne, the Indonesia-based head of auto consulting firm Dunne & Co., said Lincoln may benefit from being a new market entrant, especially at a time when Chinese car buyers may be looking for their second set of wheels.

“The Chinese like differentiation, something fresh and new,” Dunne said. “Land Rover has done well in the SUV segment by essentially just being different. Mainly it’s image. Someone might say, ‘You have an Audi? Half my friends already have an Audi. I have a Lincoln now.’ “