Ford to double China procurement
Ford is set almost to double the value of components it buys in China this year, becoming the latest global carmaker to tap low-cost Chinese parts producers to cut costs.
Bill Ford, executive chairman, said in Beijing on Thursday that the group aimed to source $2.5bn-$3bn worth of parts from China, up from $1.6bn-$1.7bn last year.
Mr Ford’s comments are the latest indication that Chinese component makers, which have long been keenly competitive on price, are now also meeting the quality levels required by multinational carmakers. Chinese manufacturers’ labour costs are about 5 per cent of those in Germany and 20 per cent of rival factories in eastern Europe.
Ford’s announcement follows Volkswagen’s move this year to raise the value of its Chinese parts imports from $100m in 2005 to $1bn. DaimlerChrysler is also sourcing more from China.
Analysts said General Motors was poised to follow suit, although the company would not comment on Thursday.
Goldman Sachs estimates that Chinese net exports of car parts will rise from $5.4bn in 2005 to $21bn in 2010 as Chinese products become more accepted overseas.
China still imports large volumes of more technologically sophisticated parts such as gearboxes and steering systems but it has become a big exporter of tyres, wheels, electronic components and glass.
Yale Zhang, analyst at the Shanghai office of CSM Worldwide, an industry consultancy, said the quality of Chinese-made components had improved thanks to increased competition and pressure from multinational carmakers that had established operations in China. The US, European Union and Canada asked the WTO last month to open a formal investigation into the tariffs China levied on foreign-made components.