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Ford JV Opens Assembly Plant in China

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Ford Motor Co. (F - Free Report) revealed that its light commercial vehicles joint venture, Jiangling Motors Corp. (or JMC), opened a $300 million assembly plant in Xiaolan, located in Guangdong Province, China. The plant will manufacture both Ford branded and JMC-branded vehicles.

The JMC Xiaolan plant will double Ford’s existing annual production capacity of 245,000 units in China by adding 300,000 vehicles. The joint venture also plans to construct an engine plant with initial annual capacity of 200,000 units. Ford also plans to introduce two new global products through Jiangling Motors, which includes a commercial vehicle and a sports utility vehicle (SUV).

In April this year, Ford Motor raised its stake in Jiangling Motors to 31.5% from 30.0%. The Detroit-based automaker purchased 13.0 million Hong Kong dollar-denominated B-shares of Jiangling Motors, which started manufacturing JMC light trucks, SUVs, and Ford Transit van in China from 1997.

Currently, Ford is the fastest growing global automaker in China. The automaker’s sales soared 48% in the first five months of the year, driven by strong demand for its EcoSport and Kuga SUVs. In the same period, Jiangling Motors joint venture posted a 7.6% rise in sales to 94,208 vehicles in the country.

Ford has embarked upon an aggressive expansion plan in China in order to catch up with rivals such as General Motors Co. (GM - Free Report) and Volkswagen AG (VLKAY - Free Report) . The company plans to triple its lineup in China by introducing 15 models, including the Kuga small sport utility vehicle by 2015.

Currently, Ford Motor sells seven models in China. The company also plans to introduce its Lincoln luxury lineup in the booming luxury vehicles market of China in the second half of 2014.

In order to develop the new models, Ford will build new plants raising its capital spending to about $6 billion annually by mid-decade from $4.3 billion in 2011. In order to keep pace with the expansion, Ford also plans to double its workforce by hiring 1,200 employees by 2015.

Ford anticipates global sales to expand by 50% to 8 million vehicles by 2015 given the potential growth in Asia, mainly China and India; and rising demand for small cars. The automaker anticipates Asia-Pacific to account for 40% of its vehicle sales in four to five years. The company also anticipates Asian sales volumes to double and account for a third of its global sales by 2020.

Currently, shares of Ford retain a Zacks Rank #3 (Hold). Volkswagen and AB Volvo are currently performing well in automotive industry. Both of them carry a Zacks Rank #2 (Buy).

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