Lincoln Looks at Options for Chinese Production

Ford luxury brand initially will face steep import duties.

by on Aug.22, 2013

Ford EVP Joe Hinrichs at a factory opening during his time as Asia/Pacific chief.

Lincoln will rely on imports when it launches sales in China next year but it is also considering the option of producing vehicles in the booming market, according to a senior Ford Motor Co. executive.

The maker also will offer products tailored specifically to China – which means at least some models will get larger back seats than are currently offered on U.S. Lincoln products.

Relying on American-made products has a number of advantages, at least initially, Ford Executive Vice President Joe Hinrichs told, including the ability to “establish the brand at an appropriate pace without the pressure of manufacturing which would force us to (try to) sell a lot.”

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But the downside is that Lincoln will initially face “pretty substantial duties,” which can run as high as 140% on some models. The hope is that increasingly affluent Chinese luxury car buyers will be willing to absorb the extra cost. There is a “strong desire” to purchase international brands even if they cost more, asserted Hinrichs, who until recently served as Ford’s top executive for the Asia/Pacific region.

Ford was a latecomer to the Chinese market, hesitating until well after rivals like General Motors and Volkswagen made initial forays and established themselves as leaders in what is now the world’s largest automotive market. Industry analysts have projected that China will also become the largest luxury car market before decade’s end.

Ford has rapidly ramped up its presence in China in recent years, Hinrichs’ boss, Ford CEO Alan Mulally, earlier this summer visiting the Asian nation to announce plans for a big increase in engine and vehicle production.

(Ford, GM set Chinese sales records. Click Here for the latest.)

A year ago, the U.S. automaker announced it would begin selling Lincoln in China, as well, as part of its plan to revive the long-struggling brand and begin what could eventually be a full global roll-out.  “This is the perfect time,” CEO Mulally said during a previous visit to China, pointing to Lincoln’s planned rollout of four key new products, including the new MKZ and the upcoming MKS crossover.

(Acura placing bets on China even as it pushes to grow U.S. sales. Click Here for more.)

While Ford may be expanding its line-up of locally made Chinese vehicles, Lincoln will focus on imports until it generates enough demand to justify the costs of localizing production, stressed Hinrichs. And that will give it time to adapt to the market. But, “at some time, if the volume is good enough,” the executive added, Lincoln will begin producing at least some products in China.

Significantly, Hinrichs said that “all the new products” now being developed for Lincoln “are being developed specifically with the Chinese market in mind.”

Among other things, that means at least some of the products will be offered in the Asian market in stretch form, with the extended rear seats many Chinese buyers demand. Most luxury competitors now offer stretch models, such as the extended-wheelbase versions of products like the Mercedes-Benz E-Class, and even a new, long-wheelbase Porsche Panamera. Hinrichs declined to say which Lincoln models will be affected but noted the most likely ones are those that would appeal to customers who prefer being chauffeured, rather than those that are driver-oriented.

“We clearly understand our customers’ needs and expectations for rear seat room and we’ll meet those expectations,” the executive said.

Sorting out the product mix is why Lincoln is waiting until the second half of 2014 to enter China, explained Hinrichs, who now serves as Ford’s President of the Americas – but who is still considered a strong internal advocate for the Chinese market.

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One Response to “Lincoln Looks at Options for Chinese Production”

  1. Jorge M. says:

    I’m sure if Lincoln/Ford can export more U.S. jobs, they will. It’s the “American Way”…