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Ford to quadruple SUV offerings in China over next year

04/22/2012 | 06:39am US/Eastern
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(Reuters) - By Ben Klayman

Ford Motor Co (>> Ford Motor Company), seeking to tap into China's growing appetite for brawny sport utility vehicles, will quadruple its offerings in that segment over the next year.

The U.S. automaker, a latecomer in the world's largest automotive market, will add the Kuga, the Chinese version of the Escape, and EcoSport small SUVs, and the larger Explorer to its sparse China SUV portfolio, Ford Asia chief Joe Hinrichs said on Sunday.

Ford currently sells only the Edge in China, leaving it under-represented in a category that offers higher profit margins for automakers.

"The next phase of our product portfolio growth really is the three SUVs and it's so important to China because of the SUV segmentation growth we're seeing," he told Reuters ahead of the Beijing auto show. He declined to identify when each of the SUVs will go on sale in China.

Ford, which makes Fiesta, Focus, Mondeo and other vehicles in China in a three-way tie-up with Chongqing Changan Automobile Co Ltd <000625.SZ> and Japan's Mazda Motor Corp (>> Mazda Motor Corp.), is joining a growing number of automakers pushing out SUVs to meet the rising demand for the vehicles. The rollout is part of Ford's plan to introduce 15 new vehicles into China by 2015.

Chinese consumers bought 2.1 million SUVs last year, an increase of 25 percent and representing almost 12 percent of total light vehicle sales, according to J.D. Power and LMC Automotive. That total is about half the 4.1 million SUVs sold in the United States, where such vehicles make up almost one third of the market.

Buyers and industry officials have said the desire of drivers to sit above China's crowded traffic in an expensive off-road vehicle is a strong draw in the status-conscious society, especially for younger buyers.

In addition, female SUV drivers, mostly young professionals, have been increasing steadily in China, to 19 percent last year from 14 percent in 2007, J.D. Power and LMC said.

Analysts also say the surging SUV sales indicate the Chinese market is maturing.

SUVs have a long history in China, dating back more than two decades to when Chrysler built Jeep Cherokees at a joint venture with Beijing Automotive. However, the market today is led by Japanese and South Korean automakers in the compact segment, and the German brands in the luxury market. Honda's CR-V led the way last year with overall sales of some 160,000.

Ford has invested or made commitments to spend almost $5 billion in China to date, including its announcement last week to build a $760 million plant in Hangzhou in eastern China.

The Hangzhou plant is scheduled to begin building vehicles in 2015, and is meant to help Ford close the gap with its larger rivals. Ford sold 320,658 vehicles in China last year, compared with Volkswagen AG's (>> Volkswagen AG) annual tally of 2.26 million and General Motors Co's (>> General Motors Company) 2.55 million.

RAPID EXPANSION

Ford's rapid expansion in China - it will double annual production capacity to 1.2 million vehicles in 2015 -- led the company to say this month it would realize a "small loss" in Asia in the first quarter.

Executives cited major investments in new products like the redesigned Focus small car and a new factory in Chongqing, but added Asian operations will be profitable for the full year in 2012.

Ford plans to build the small Kuga and slightly smaller EcoSport SUVs in Chongqing, Hinrichs said. The larger Explorer, which seats up to seven people, will be the first Ford vehicle exported from the United States into China.

Ford's Chinese dealers, which have been limited to selling only five vehicles before this month's rollout of the new Focus, cannot get the SUVs fast enough. At a dealership in Shanghai last Saturday, salesman Hu Jun said the reasons for consumers' growing desire for SUVs were no surprise.

"It's high and big and safe, and it's very convenient if the family wants to go out," he said.

SUVs also are the next frontier for image-conscious Chinese buyers, which will translate to healthier profit margins for automakers.

"It's more powerful, masculine and big," Shaun Rein, managing director of consulting firm China Market Research Group, said of SUVs. "People like to be in an environment that just seems big."

(Editing by Ron Popeski)

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