The Ford Company was relatively new in the Automobile sector in the Chinese economy at the time of its incorporation in the country in the year 1995. With the growing market in automobiles, luxury and otherwise, the Company has successfully been able to occupy its share in the market, and the said share continues to grow as the automobile market grows in a size bigger than it already is.
Unfortunately, the future for the company could take either of two directions where only one is for the better. The more pessimistic possibility arises in the face of the territorial dispute in the South China Sea, and if the problem grows into a political event, the future of Ford Motors in China is not going to be as optimistic as the automobile’s growing demand in China seems to appear. The South China Sea holds great potential not just because of the various trading routes that it provides for the country’s trade, but also for the oil and mineral reserves that it is expected to hold.
The dispute is purely territorial and spreads over the claims of a number of countries inclusive of Malaysia, Taiwan, Philippines, Vietnam and China itself. Malaysia lays claim over three islands in Spratlys; Philippines claims eight said islands and also a chief portion of the South China Sea itself. Vietnam, Taiwan, and China also claim a significant portion of the sea. The trouble is likely to arise in the case of a breakout of a territorial dispute over these parts of the seas because due to the adverse impact on the trading routes; the Ford Company is also likely to see losses due to cutting off of this very critical trading option.
As far as the production share of Ford Motors in China goes, it would be very fair to say that the Company has control of the significant portion of the automobile market in China. But is China home to a significant portion of the Company’s total production; definitely not. Along with the Companies that Ford Motors is engaged in joint ventures in China with, Ford is now the proud owner of five factories and of two plants countrywide, and these two plants are where the engines are manufactured. Because of its production capacity within the country, Ford Motors is now the fourth largest automobile manufacturer in China.
China may not be a significant part of the supply chain for the Ford, but it is well on its way to becoming one with the expansion of the Lincoln Luxury line in the country. The Company’s CEO anticipates that China is going to replace the United States as the largest market for the Lincoln Brand come year 2020. As of now, however, the Company sold 11,000 Lincoln brands in China against 100,000 in the United States.
With the rise in the overall automobile share in the China market, a number of companies including Ford Motors are importing material for production from various parts of the world including Europe. With the increasing market share, the percentage of the material that is being imported for the production of vehicles may go down, but a number of imports overall are still on the rise with more and more production plants being set-up cross-country. Like all other major companies in the country, Ford Motors follows very much a similar trend. Alongside the import of parts for the production of vehicles, the company is also engaging in the import of assembled cars, low as the ratio may be.
The Ford Motors may be setting China up to succeed so that exports from China could reach the automobile demands in many other parts of the world. This is, however, a dream and an expectation for the future. For now, the company is only focused on meeting the demands of motors within China itself. Because of the demand for a motor vehicle in China soaring higher and higher with every passing day, the manufacturing plants are only meeting the demands within. There are however dreams for the company to set up more plants for the luxury line so that Ford Motors China could become one of the largest exporters in addition to being the largest markets for the Ford Lincoln.
Not just Ford, a number of automobile manufacturers are switching ports from Tianjin to Shanghai and many others. The shift suddenly started after a major explosion at the port which transpired only last year. The number of car parts that succumbed to the blast was a major loss for many companies and also further motivation for others to take steps in prevention from any political event or any event that results from territorial disputes that are underway in the country. The step, of course, was a difficult one to implement after the port was made a center to political disturbance since it has a capacity of handling 40 percent of the car imports in China.
Another step that a number of Companies including Ford Motors are taking is the minimization of the percentage of the automobile parts that they import from other parts of the world. Most of the companies are lately making attempts at manufacturing most of its parts within the country so that the risks of political events and territorial disputes could have the slightest possible impact on production. It is so that Companies no longer have to suspend their assembly lines when an incident like the one last year affects the functioning of the Company.
With all of the precautions that are being implemented by Ford Motors, there is still a lot that could be done to keep the market safe as can be from the political threats and the territorial disputes in the country. The First step it could take is to look for another market where the demand for automobiles is significantly high so that there is an alternative source of revenue should anything actually happen in the largest market in the world. The second thing it could do is to further take steps to reduce its reliance on imports for Ford Motors in China. And the third precaution that could be taken by the company would be to geographically disperse its manufacturing plants from where automobiles could be exported to other parts of the world.
This would be so that if the major ports in the country become non-useable because of any political unrest, supply for cars could be sought from other parts of the world. It is also important to manage the business risk where the production would increase to a point where the demand for the product cannot keep up with the supply. In order to save the company from this particular setback, it would be advisable to hire experts who could monitor the markets and also who could make assumptions and estimates regarding the future direction that the product demand is likely to take.
The Ford Motors in China is a company which has a bright future ahead of it in the current state of growing demand coupled with the future plans of building showrooms in the country over the course of the next decade. The same future could as easily turn bleak with the onset of a political incident or dispute. The best course of action would be to take steps in order to minimize losses in the event of the likely dispute.
Works Cited
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Kaplan, Robert D. "The South China Sea will be the battleground of the future." Business Insider 06 February 2016.
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