F Ford Motor Company

By Chester Dawson 

DETROIT -- Ford Motor Co. hit another speed bump in a core part of its business, posting a 21% slide in auto sales in China where the company plans to ramp up production despite signs of cooling demand for passenger cars and trucks.

Chief Executive Mark Fields has made China a priority and the company sold a record 1.27 million vehicles there last year. But it has lagged behind rivals such as General Motors Co. and Volkswagen AG, and the pace of growth in the Chinese market is expected to weaken. In March, overall car sales rose 1.7%, compared with a 6.3% gain in the first two months and a nearly 10% increase a year ago.

Ford said its sales in China fell to 90,457 vehicles in March, from 114,788 a year earlier. Those sales include vehicles made by the company's joint venture partners in China, but exclude its Lincoln premium brand vehicles.

"We remain committed to offering a great portfolio of vehicles," said John Lawler, chairman and CEO of Ford Motor China, in a statement.

The No. 2 U.S. auto maker blamed the drop on China's decision to pare back a tax break for vehicles with smaller engines. Sales of vehicles that didn't benefit from the tax incentive rose in the first quarter, even as the brand's overall volumes fell 19% on the year.

The sluggish performance in China comes when Ford has lost market share in its home market and seen its stock price trade at five-year lows. The company unnerved investors last month by saying it would take a $295 million charge for recalls, the second time in a year that safety-related issues with vehicles have dented its bottom line.

China has been a bright spot for Ford, but its inroads there face increasing headwinds. In January, the China Association of Automobile Manufacturers group predicted a 5% rise in China's car sales this year compared with 15% in 2016.

Even so, Mr. Fields and has taken steps in recent weeks to bolster Ford's presence in China, the world's largest car market.

Earlier this month, Ford said its local joint venture Changan Ford Automobile Co. will start building electric cars, starting with the Mondeo Energi plug-in hybrid vehicle next year, followed by a new all-electric sport-utility vehicle within five years. The company hopes to take advantage of Chinese government policies seeking to promote the sales of greener vehicles.

In March, Ford said it planned to start production of Lincoln premium brand vehicles in China by late 2019. The company sold 33,000 imported Lincolns in China in 2016, three times more than the year before, and the Detroit-based car maker is betting that local manufacturing will goose demand by avoiding a tariff on imported vehicles.

Write to Chester Dawson at chester.dawson@wsj.com

(END) Dow Jones Newswires

April 13, 2017 12:58 ET (16:58 GMT)

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