Ford Seals Big Deal for Chinese Electric Cars in Time for Trump

Nov. 8, 2017
Ford will work with China’s Anhui Zotye Automobile Co. to manufacture and sell a full line of electric vehicles that will sell under a new brand unique to the Chinese market.

Ford Motor Co. is going all-in on electric cars in China, the world’s largest market for battery-powered vehicles, and it wants President Donald Trump to know about it.

The second largest U.S. automaker said on Nov. 8 that it’s finalized an alliance with China’s  Anhui Zotye Automobile Co. to manufacture and sell a full line of electric vehicles. The companies will invest 5 billion yuan (US$756 million) to develop the cars they’ll sell under a new brand unique to the Chinese market.

To underscore the deal’s significance, Ford’s top executive in Asia, Peter Fleet, is meeting with Trump and China’s president, Xi Jinping, in Beijing on Nov. 9, he said on Bloomberg Television.

The news comes as Ford looks to accelerate its push into battery-powered cars and self-driving vehicles under new CEO Jim Hackett. The meeting on Nov. 9 will be the first public outreach to Trump since Hackett replaced previous Ford CEO Mark Fields, who met several times with the president as he looked to maintain a delicate relationship with the White House.

In the meeting, Fleet said he will confirm Ford’s plan for nearly $10 billion in exports from the U.S. to China over the next three years.

Ford has said that at least 70% of its own Ford-brand vehicles sold in China will offer electric or hybrid propulsion by 2025. The push to low- and zero-emission vehicles fits with China’s desire to clean up the country’s fouled air.

Mobility Freedom

“Quality of life is also freedom of mobility,” Bob Shanks, Ford’s CFO, said in an October interview. “We will have electric vehicles. We will have plug-in hybrids. We will have hybrids.”

Ford and Zotye plan to build a new manufacturing facility in Zhejiang province as part of the 50-50 joint venture, the U.S. automaker said. The plans still require regulatory approval.

Automakers are accelerating investments into electric vehicles to meet stricter emission and fuel-economy rules set to take effect in major markets. China is implementing a cap-and-trade framework next year that will penalize companies that don’t meet fleet-based limits through fines or buying credits.

While Ford chose to team up with Zotye and Volkswagen AG has partnered with Anhui Jianghuai Automobile Group Corp. to make electric cars, the Chinese government is discussing a plan to allow foreign carmakers to set up wholly owned electric-vehicle businesses in its free trade zones, according to company officials briefed on the matter. Automakers like Tesla Inc. would likely benefit if China relaxes its joint-venture rule.

Growth Forecast

Besides Zotye, Ford also has joint ventures in the country with Chongqing Changan Automobile Co. and Jiangling Motors Corp. In September, Ford also announced an alliance with Mahindra & Mahindra Ltd. in India to collaborate on electric and connected vehicles.

Ford expects the market for new-energy vehicles in China to grow to six million units per year by 2025, of which about four million vehicles will be all-electric. Deliveries of such vehicles rose 53% to 507,000 units in 2016, according to the China Association of Automobile Manufacturers.

In May, Volkswagen received approval for a new joint venture to produce electric cars. Daimler AG and BMW AG also have electric car brands under their partnerships with BYD Co. and Brilliance China Automotive Holdings Ltd.

China Competition

While carmakers including Tesla are racing to grab a slice of the electric-vehicle market in China, local manufacturers such as Beijing Automotive Group Co. have had considerable success in the market, in part thanks to generous government subsidies. New entrants are also coming in.

Local startup NIO is raising more than $1 billion in a new round of financing from investors led by Tencent Holdings Ltd. to develop affordable and connected battery cars, according to people with direct knowledge of the matter, who asked not to be identified as the information is private.

To give a boost to the sector, China also eased financing for consumers on Wednesday. Buyers of electric cars can take out loans for up to 85% of the cost of a new-energy car, compared with 80 percent for conventional vehicles.

“To the extent that customers have more disposable income, which they will over time in China, clearly that’s an opportunity for us,” Ford’s Shanks said.

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Licensed content from Bloomberg, copyright 2016.

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