BEIJING -- Ford Motor Co. has received approval from the Chinese government to build an engine plant in the east China city of Nanjing. The plant initially will make engines for Ford and Mazda cars assembled in China, but eventually it could make engines for export.
"We don't have any plans at the moment to export, but we are not ruling that out," said Ford Motor (China) spokesman Kenneth Hsu.
Mazda Motor Corp. and Changan Automotive Group also are investors in the engine plant, which will have an annual capacity of 350,000 engines and is scheduled to begin operation in 2007. Hsu would not reveal what size engines the plant will make.
"The engines are related to the product strategy so we will announce the engine size later," he said.
Ford assembles the Fiesta subcompact and Mondeo full-sized sedan in the southwest China city of Chongqing at its joint venture with Changan Automotive. The Chongqing plant is boosting capacity to 200,000 units. Last year it assembled 50,000 cars.
A second assembly plant is under construction in Nanjing and will have a capacity of 160,000 units. It will make Ford- and Mazda-badged cars.
For foreign automakers here, building an engine plant has become almost a necessity under new import rules that went into effect in April. The rules stipulate that cars with a certain number of imported systems - say, a body and an engine - will be taxed at the 30 percent rate levied on imported vehicles rather than the 15 percent rate for imported components.
Ford's new engine plant is "in line with the Chinese government's new industrial policy which encourages the local development and manufacturing of engine products," said Mei Wei Cheng, CEO of Ford Motor (China).
But engine exports almost certainly are in Ford's future. China's market growth is expected to slow to around a 10 percent annual increase for the next five years, from 16 percent last year and 70 percent the year before.
Engine exports already are trickling out of China. General Motors exports six-cylinder engines for the Chevrolet Equinox compact SUV from Shanghai to its CAMI Automotive Inc. plant in Ingersoll, Ontario.
And with some 25 engine plants either finished or under construction, China will be awash in engine capacity.
Said Michael Laske, president of Austrian engine developer AVL List GmbH China: "As the component base increases in China due to production volume increases, China will become a significant engine exporter. Companies are also doing more product development here in the powertrain area, lending more impetus to this trend."
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