Ford slides deeper into China rut after worst ever first-half vehicle sales

By Norihiko Shirouzu

BEIJING (Reuters) - Ford Motor's China slump intensified, with vehicle sales tumbling 38 percent in June and the automaker recording its worst-ever first half, as buyers shunned its aging models that are awaiting overhauls and flocked to rivals.

The U.S. automaker announced on Friday it sold 62,057 vehicles in China in June, taking its sales for the first half of the year to 400,443, down 25 percent compared with the year-ago period. According to consultancy LMC Automotive, it was Ford's biggest first-half percentage decline since starting operations in China in 2001.

Ford, which undertook a big expansion in China earlier this decade, is paying the price for a lack of new models in its lineup. Last year, its sales fell 6 percent even as overall vehicle sales in China rose 3 percent.

"We always knew it would be a challenging year for us given our position in the product cycle," Peter Fleet, head of Ford's Asia-Pacific operations, which include China, said in a statement.

Fleet has previously said Ford's sales will not likely regain momentum in China, the world's biggest auto market, until next year when the first of new vehicle models arrive in showrooms in large enough numbers.

LMC Automotive senior market analyst Alan Kang said one reason Ford is struggling in China is "fiercer competition" in the car market there, where luxury brands are suffering amid the rise of local Chinese brands.

"Weak global brands are squeezed like the meat in a sandwich, so this is why we can see not only Ford," but Hyundai Motor Co, KIA Motors Corp, and Peugeot SA have "all suffered" in the last two years, Kang said.

The dim sales numbers come as the United States and China slapped tit-for-tat duties on $34 billion worth of the other's imports on Friday, with Beijing accusing Washington of triggering the "largest-scale trade war" ever in a sharp escalation of their months-long conflict.

With automobiles subject to additional duties by China, Ford has much to lose. Last year, it shipped about 80,000 vehicles to China from North America, more than half of them its upper-end Lincolns - including the Lincoln Continental sedan and the Lincoln MKX crossover SUV.

Ford said a day before it will not hike prices of imported Ford and Lincoln models in China, thus absorbing the additional cost of tariffs on U.S.-made vehicles.

Ford's troubles in China, which include the absence of a country head following the abrupt departure of the previous chief in January after only five months at the helm, contrast with General Motors Co's steady performance there. Ford's Fleet has been overseeing the company's China operations, as it searches for a new country chief.

GM sold 4.04 million vehicles in China last year, up 4.4 percent from a year earlier. Ford, in comparison, sold 1.19 million cars last year, down 6 percent. Japan's Toyota Motor Corp and Honda Motor Co also outsold Ford last year in China.

In an effort to reverse the slump, Ford has said it is overhauling its product lineup for China. Redesigned Focus compact and Escort subcompact cars are due to hit showrooms in China later this year, along with the new Lincoln MKC and Nautilus sport utility vehicles.

In June, sales of Ford's premium Lincoln brand rose 12 percent to 4,350 vehicles, with sales volume for the first half totaling 24,314 vehicles, up 4 percent from a year earlier.

Still other brands remained under pressure. Particularly poor performing was the Ford brand, whose sales collapsed.

(Reporting By Norihiko Shirouzu; additional reporting by Nick Carey in Detroit, Editing by Muralikumar Anantharaman)