Ford Plans $760 Million Factory in China

Ford Motor Co. (NYSE: F) said Thursday it will build a $760 million assembly plant in Hangzhou as part of a plan to double its production capacity in China by 2015 and catch up with global rivals.

The Dearborn, Michigan-based car company has chosen China for its largest factory expansion program in a half century. Ford and joint venture partner Changan Ford Mazda Automobile Co. will start construction later this year and the plant will open in 2015, initially producing 250,000 vehicles a year.

This brings Ford's total investment in China to about $4.9 billion since 2006.

The Hangzhou plant announcement comes just two weeks after Ford said it will invest US $600 million to expand capacity at its Chongqing facilities by 350,000 passenger cars, and less than six weeks after completing a third assembly plant in Chongqing, the home of the New Focus, which increased its China passenger car capacity by one-third to 600,000 units. Chongqing is the largest manufacturing location for Ford outside southeast Michigan.

These are incredibly exciting times for Ford in Asia, Joe Hinrichs, president of Ford Asia Pacific and Africa, said in a statement. This expansion will help us realize an increase in global sales by about 50 percent from 2010 to about 8 million vehicles annually by mid-decade. Building this plant helps lay the foundation for that growth and reconfirms our commitment to China, which is expected to have sales of about 30 million vehicles by 2020.

Right now, Ford sells only five models in China, including the Fiesta subcompact, Edge SUV, Mondeo sedan, S-Max small minivan and the Focus compact. Ford said it would bring 15 new vehicles and 20 new powertrains to China by 2015, increasing the company's relatively limited product range available to the Chinese consumers.

Ford, though, is late to China's party. The company has less than 3 percent of the market share, which lags behind rivals General Motors Co. (NYSE: GM) and Volkswagen AG (FRA: VOW). In 2011, GM claimed 13.8 percent of the market share in China, while VW claimed 12.2 percent.

Auto sales in China rose 2.5 percent last year, after a decade of double-digit growth. In the first quarter of 2012, sales were down 1.3 percent, compared with a year earlier. That's the first quarter to show decline in auto sales in seven years, according to official figures.

The slowdown has been attributed to a raft of factors, from the end of tax incentives for small cars to local authorities' initiatives aimed at easing ever-worsening traffic congestion in major cities, as well as the cooling of the Chinese economy.

Ford is expected to unveil a sport utility vehicle at the upcoming Beijing auto show, which opens on Monday.

Shares of Ford Motor Company (NYSE: F) rose 0.26 percent, to $11.69 a share, in Friday's morning trading. Shares of rival General Motors Co. (NYSE: GM) and Volkswagen AG (FRA: VOW) fell 0.12 percent and 1.68 percent, respectively.