Ford Motor Co. (W 500/4) will begin producing its upscale Lincoln brand in China by late 2019 after sales almost tripled last year, joining the ranks of automakers localizing production to avoid import taxes in the world’s largest auto market.
The automaker will build an all-new SUV model with joint venture partner Changan Automobile Group in the city of Chongqing. A Ford spokeswoman declined to comment on plans for more local Lincoln models beyond the SUV, or how much the carmaker will invest as part of its move to produce the brand locally.
China requires foreign automakers to manufacture cars with a Chinese joint venture partner, and imposes 25% in customs taxes on imported vehicles, pushing their retail prices into the range of more upscale models that are manufactured locally.
Toyota Motor Corp.’s Lexus and Hyundai Motor Co.’s newly created Genesis are the only luxury marques owned by major automakers that aren’t produced in the world’s largest car market.
“Makers of entry-level luxury cars have to localize production otherwise they couldn’t compete with rivals that have done so,” said Yale Zhang, managing director at researcher Autoforesight Shanghai Co. “It is only natural for Lincoln to start production in China after several years of stable growth.”
Ford is producing the Lincoln in China about three years after introducing the brand in the country. Sales of the marque have almost tripled to about 33,000 vehicles in China last year. The automaker will continue to import Lincoln vehicles from North America, including the new Continental sedan introduced late last year, the company said.
By choosing a sport utility vehicle as its first locally produced model, Lincoln is banking on China’s love affair with spacious vehicles. Annual sales of 30,000 to 50,000 vehicles is commonly regarded as the threshold for local production in China, according to Zhang at Autoforesight.
Nissan Motor Co. started producing its upscale Infiniti marque in the country in November 2014. Sales rose to a record 41,590 units last year. General Motors Co.’s Cadillac brand topped 100,00 units for the first time in 2016, after beginning production in 2006. Hyundai has said it’s deciding on options and timing to build its fledgling Genesis cars in China. Toyota remains a holdout among global automakers in terms of manufacturing the Lexus in China, citing quality concerns.
Chinese consumers are expected to buy more SUVs and minivans than sedans this year for the first time, according to projections from the China Passenger Car Association, as the combination of rising incomes, lower oil prices and policies allowing more children triggers a fundamental shift in the world’s biggest market.
Sales of SUVs surged 45% last year in China, outpacing the 15% gain for overall passenger vehicle deliveries, according to China Association of Automobile Manufacturers data. Demand for utility vehicles continued to outpace that of the broader market, with sales gaining 22%, or more than triple the pace of growth for the industry.
“The Lincoln product and ownership in China is resonating with Chinese customers even beyond our expectations,” Kumar Galhotra, president of Lincoln, said in the statement. “We are now taking Lincoln to the next level by building a new SUV in China to join a dynamic lineup of imported cars and SUVs.”