Ford To Gain A Strong Presence On Chinas Truck Market
|   Friday, August 24, 2012
The market auto place is permanently changing. When Jiangling Motors Corporationm the affiliate of Ford Motors Company, agreed to acquire 100 percent of Taiyuan Changan Heavy Truck Company (Taiyuan), that was when Ford Motors took the spotlight. This acquisition marks its first entry into China's heavy duty truck market, for JMC which currently makes light trucks and sport utilities.

China Chang'an Automobile Group and China South Industries Group Corp.
Taiyuan's present owners, suggest that the sale price is around 270 million yuan (42 million dollars). Of course that is only an approximate value because details of the transaction were not announced; also, the appropriate Chinese authorities must approve the deal or nothing goes ahead.

On the Shenzhen Stock Exchange, Ford owns 30 percent of JMC. When it begun producing the Ford Transit at JMC, Ford acquired its stake, back in 1995. At ehe same time General Motors, the well-known North American rival, was in a hotly contested competition to form a joint venture with Shanghai Automobile Industry Corporation with the objective of producing passenger cars in China; the attempt was successful and Ford was left behind in that field. As the joint venture came to a level where the public easily recognized it, one of the leading positions on the Chinese passenger car segment came along too. Put in other words, General Motors' joint ventures in China now occupy 11.7 percent of the passenger car market, while those of Ford only have a 2.7 percent market share.

Dave Schoch, Chairman and CEO, Ford Motor China, said: "A strong heavy truck operation like Taiyuan will complement Ford's existing passenger car and light commercial vehicle operations here in the world's largest and fastest growing vehicle market."

Until now, Ford has invested a total of 4.9 billion dollars in JMC and other ventures to grow its presence in the country. JMC sold more than 190,000 vehicles in 2011, bringing in a revenue figure of 17.5 billion Yuan (approx 2.7 billion dollars).

Given China's long term economic growth potential and strong investments in the infrastructure by the government, Ford and JMC's interest in China's heavy duty trucks market is quite understandable. More than North America, Europe and South America combined China is the world's largest market for heavy trucks, with nearly one million units sold last year.
Also, Ford has tons of experience as well as world class products and technologies, including the heavy truck business, which can all be deployed to support JMC after the acquisition is over.

The introduction of advanced technology tends to make the trucks made by the international players unaffordable; that doesn't sit well with the Chinese market which is very price conscious. Right now, China's freight industry is extremely fragmented and is dominated by private companies that own one or more trucks, although seldom do they have more than a handful of trucks.

The acquisition of Taiyuan may be an interesting diversification strategy for JMC and Ford, but don't expect it to add much to either company's overall presence in China anytime soon; on the long run, however…
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