Ford Motor Co.’s signal to the auto world: Here comes China
HONG KONG — After years of predictions that cars sold in the West would bear the “Made in China” label, the time has finally come.
Ford Motor Co.’s plans to build its popular Focus compact cars in China, rather than Michigan or Mexico, is a milestone in China’s automotive rise. Chinese auto industry leaders praised the move as long-awaited confirmation that the country’s factories have become as efficient and high-quality as those in the United States and Europe.
The question now is how political leaders greet the development, amid rising skepticism in the U.S. over Chinese trade policies and the benefits of free trade in general. Though the White House so far has been muted in its reaction to Ford’s move, President Donald Trump, in particular, was strongly critical of Chinese trade policies during his campaign last year. China’s high tariffs on imported cars and auto parts have already emerged as a potential trade issue.
“Ford’s moving production to China shows China’s competitiveness in manufacturing is continuously increasing and our industrial supply chain is improving,” said Cui Dongshu, the secretary-general of the China Passenger Car Association, a government-backed trade group in Beijing. “But this is obviously against Trump’s policies — it is quite complicated and may cause some friction in Sino-American trade in the future.”
China represents a competitive challenge and a profitable opportunity for U.S. carmakers.
China is already the world’s largest automaker, with annual car production roughly equal to that of the United States and Japan combined. Chinese players have long wanted to develop underused factories dotting major cities to increase production and export the excess.
For years, it has been a quixotic dream. Such factories tend to churn out lower-quality, domestic-brand rides that would not pass muster with U.S. or European consumers.
But China is angling for a big share of the future. Beijing has put very heavy pressure on Western automakers to transfer their latest, most cutting-edge technology to China as a condition of doing business. Many companies, including Volkswagen, General Motors and Ford, have plans to shift more research and development to China, particularly around electric cars.
China has an increasingly global auto presence. General Motors began exporting the Buick Envision compact SUV to the U.S. last year. Volvo, which is owned by a Chinese company, started exporting S60 sedans from China to the U.S. in 2015, while Cadillac this spring started shipping its Shanghai-made CT6 Plug-in hybrid to the U.S.
Ford’s decision will significantly ramp up the country’s car exports. The Focus would more than triple China’s exports of fully built cars to the United States.
As a manufacturing base, China holds strong appeal for Detroit’s automakers. Auto factory pay in China is similar or slightly higher than in Mexico at around $1,250 US a month, including government-mandated benefits such as contributions to savings funds with which workers can buy housing. Overtime adds roughly $300 a month. But that pay is much lower than it is in the U.S., where workers earn several times as much even before overtime.
Auto parts are also much cheaper in China than in the U.S., because labour tends to be a larger share of the cost than final assembly. The global auto parts industry has shifted much of its production to China, partly because of low costs and partly because China’s steep tariffs make it impossible for multinational manufacturers to compete in the Chinese market unless they produce in China.
And quality is high at Chinese factories run by Western carmakers.
Global automakers already have built some of their most modern factories in China. A Ford factory in Hangzhou has 650 robots. A somewhat smaller General Motors factory in Shanghai has 530 robots that make Cadillacs with all-aluminum bodies — one of the latest and toughest manufacturing challenges even in the West.
GM’s China-made Buick Envision ranks slightly above average in initial quality surveys of U.S. consumers among 13 compact SUVs, according to J.D. Power and Associates, the international quality rating company.
Chinese domestic automakers still lag in quality surveys. But among the global brands, cars made in China come from assembly lines that are identical in almost every respect to factories in the West — except that the factories in China, because they are new, tend to be more automated. Jeff Cai, the general manager of the China automotive practice at J.D. Power, said that the relative newness of Chinese factories tended to balance out the limited experience and high turnover of Chinese workers.
“In terms of the building quality,” he said, “it’s pretty similar.”
Industry insiders fear that all the auto factory capacity will encourage China to increase exports if homegrown demand slows down.