Ford Foregoes Plan To Build Single China Sales Network

Ford China
Workers assemble vehicles at a plant of Changan Ford, a joint venture between Changan Automobile and Ford Motor Company, in Harbin, Heilongjiang province, China February 22, 2017. (Photo: REUTERS/Stringer)

The unprecedented attempt by Ford Motor Company to boost profitability by bringing American-style efficiency to its fragmented car dealership network in China has been shelved.

What Ford wanted was to establish a unified national sales company to sell its motor vehicles in China. Its plan called for combining the separate sales channels of its two Chinese partners: Chongqing Changan Automobile Co and Jiangling Motors Group.

Announced by Ford in June 2018, this plan intended to promote operational efficiency in its loss-making China operations. Unification is standard practice in most other markets where Ford operates.

Ford is the only foreign carmaker operating in China that has tried combining sales channels for mainstream cars.

Ford's decision to unify its disparate sales operations was also prompted by the deep slowdown in China's economic growth due to Trump's trade war. Its dealerships were also suffering huge losses, as was Ford's overall operation.

Doing business in China, however, was more complicated than Ford imagined. Apart from business rivalries among its two partners, Ford also had to contend with interference from local governments that would have lost tax revenue from the rationalization.

Experts said Chinese automakers also don't want to lose control over sales decisions. Oddly, they're generally unwilling to trust other Chinese firms even if these firms are business partners.

"I would say there was a lack of deep understanding on how relationships work in China," said Anning Chen, president, and CEO of Ford China.

Analysts said this is the first time Ford has abandoned a rationalization plan. This plan would have helped arrest the plunge in Ford's sales, which analysts say is unprecedented for a major global automaker in China in the extent of its losses.

Ford's sales began losing a lot of steam in late 2017. That descent accelerated in 2018 when Ford saw its sales plunge by almost half to 504,488, according to consultancy IHS Markit. In 2016, Ford saw its sales hit a peak of 1.08 million vehicles in 2016.

IHS forecasts Ford's sales will plunge further to 382,882 this year. Worse, Ford's China market share is predicted to fall to 1.4% compared to 3.8% in 2016, said LMC Automotive.

Joe Hinrichs, president of Ford Automotive, said the company's goal remains profitability.

"You can be a profitable business in China with a relatively low market share because of...the size of the market," he said to Reuters.

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