Ford Motor Co. (NYSE:F) has unveiled the next piece in its plan to return its troubled China operation to growth: A new affordable SUV developed specifically to win new customers in China's up-and-coming cities.
The new Ford Territory could be tremendously important for the Blue Oval, which saw its second-quarter sales in China decline 31% and its joint-venture profits dwindle to nearly zero. Here's what we know about the vehicle, and why it could be a key ingredient in Ford's recipe for a turnaround in China.
Meet the Ford Territory
Ford said that the new Territory SUV is a mid-size, two-row (5 passenger) SUV that will be offered with three different powertrains -- gasoline, 48-volt mild hybrid, and plug-in hybrid -- when it goes on sale next year.
Several of Ford's best high-tech features will be available as options, including the Co-Pilot360 driver-assistance suite and a voice-activated "infotainment" system that speaks and understands Mandarin Chinese.
Ford developed the Territory with one of its three Chinese joint-venture partners, Jiangling Motors. The JMC joint venture has historically focused on trucks: It builds Ford Transit vans and a Ranger-based off-road SUV called the Everest, as well as some trucks and commercial vehicles sold under China-only brand names.
Targeting a fast-growing group of new customers
Ford designed the Territory specifically to appeal to new buyers in China's so-called "emerging" cities -- urban markets in the nation's interior where standards of living are just now rising to Western levels. Put another way, these are locations where there are plenty of people looking to buy what might be their first-ever new vehicles.
First-time buyers are a vital demographic for any automaker -- win such a customer's loyalty with a vehicle that they love, and you may sell them several more vehicles over their lifetime. If the Territory succeeds in gaining fans for Ford in these newly prosperous regions, the benefits could last for decades.
A lot of emerging-cities buyers have recently been choosing crossover SUVs from China's domestic automakers. These are inexpensive vehicles, and they've put pressure on global automakers' margins in China, but many Chinese customers consider them to be of lower quality.
Some global automakers -- most notably, General Motors (NYSE:GM)-- have responded to the threat by launching new, affordable brands of their own specifically for China. GM's Baojun marque has had great success with several family-friendly models, including a compact SUV called the 510, thanks to a smart sales pitch: "Global-automaker quality at Chinese prices."
Ford China CEO Peter Fleet said the Blue Oval is thinking along similar lines: "The Territory is a breakthrough for Ford in China in terms of our ability to successfully compete with Chinese automakers for millions of customers that we do not currently serve."
Fleet further described the Territory as a "key proof point" of Ford's Chinese strategy. "We brought Territory to market with speed, high quality and cost efficiency. It will be affordable for young families and new buyers across China, not just the coastal megacities. And the technology will delight customers."
If Fleet's optimism proves correct, the Territory could pay dividends for Ford and its shareholders for many years to come. We'll learn more when the SUV begins arriving at dealerships early next year.