Chinese cars are coming, and in volume! Okay, a more accurate wording would be cars made in China are coming. But they are half Chinese, given that a Chinese auto manufacturer, Ford’s partner Changan, owns 50% of the plant where they will be produced.
Ford Motor Co. announced that it will begin manufacturing Focus models for the U.S. market in 2019. That makes a lot of sense. Ford already manufactures the Focus for the China market at a Changan plant. It already has a supply chain in place for that model. And quality will not be an issue. Changan Ford models need to be just as good for the China market as they will need to be for the U.S. market.
Of course, Volvo is already importing its S60 sedan manufactured in China to the U.S. in small numbers. And those are manufactured by a fully-domestic Chinese company, Geely, not a joint venture. It helps that Geely owns Volvo, natch.
Now that Ford has stepped into the abyss, I expect GM will follow. It has plenty of China capacity and would likely prefer to use some of its U.S. capacity for pickups and SUVs.
This is not bad news for U.S. dealers. They will get more of the models they can sell, and less pressure to move the models they can’t sell. And I suspect U.S. consumers will not remember that the Focus they bought was made in China, at least not for long.
When will Chinese automakers begin to produce vehicles here in the U.S.? I suspect they will start eyeing the U.S. market again now that sales growth in China is slowing. But they won’t be able to market their cars on price alone, and they will likely need to enter the U.S. market with a small SUV or similar model. Maybe in 2019 we will see some attempts – again – to enter the U.S. market by a Chinese automaker.
Okay, I will take off my China market analyst hat. This week, we have a lovely piece by James Taylor of The Presidio Group on the impact of rising interest rates on dealership valuation. He sees the market changing from a seller’s to a buyer’s market. Read his column to see why.
Also this week, I look at a trend in the private equity sector of taking a minority stake in a dealership or dealership group. There are some nice advantages to that approach. Read about them here.
Then there is the section that everyone opens first – Transaction News.