Ford Terminates Chinese Model in U.S. Amidst Trade War
In an unforeseen announcement this week, Ford Motor Company called for an immediate cancellation of their plans to sell their new Focus Active in the United States in the wake of new import tariffs imposed by the Trump administration on Chinese goods.
The decision comes in the midst of escalating trade war between the US and China and since the Ford Focus Active is manufactured in China, the company has decided that the prospect of increased tariffs does not justify the sales of the new model in the US.
Bad News Crossover Fans
The Focus Active was set to go on sales around this time next year in 2019 and compete in the compact crossover market segment in the US within the price range of $20,000 to $30,000. But after the newly imposed tariffs, sales of the new model will commence in certain areas of China and Europe while the sales plan in the US is going to be scrapped altogether.
Ford is adamant that scrapping sales of the new Focus Active will not cost any jobs or have a remarkable impact on the overall quarterly sales of the automaker in the US but insist that the new tariffs would lead to a significant increase in production costs of automobiles in the US, especially of Chinese made models which would make sales of such models impractical.
Most of the vehicles sold by Ford Motors in the US are actually manufactured and assembled in the US or its neighboring regions like Mexico, Canada and Galhotra; 95 percent of the vehicles in fact which means that most of the Ford models in production right now are relatively safe from any tariff impositions from the US.
With that said, some models like the EcoSport are made in the U.S. while the Transit Connect compact vans are manufactured in and imported from Spain but Ford believes that even these models are not at risk given the current trade environment.
Escalating Trade Battle between China and the US
Trade wars between the US and China have been escalating gradually after the 25 percent import duties that had been previously imposed on vehicles manufactured in China by the Trump administration. The US government is even threatening to impose further import duties on additional $200 billion in Chinese products.
This comes in conjunction with the tariffs imposed on steel and aluminum earlier this year which was believed to have a drastic impact on the automobile manufacturing industry in the United States due to dramatically increased prices of aluminum and steel imported in the country.
According to industry experts, there is a visible state of alarm in the automotive industry and the decision of the Trump administration to introduce such unfeasible tariffs and duties will eventually lead towards higher production costs resulting in higher vehicle prices along with a reduction in consumer options and choices in terms of car models since these decisions will lead to many models being axed by manufacturers.
Additionally, industry experts believe that these trade battles are a sign of more dramatic changes that are yet to come.
What Next for Ford?
Even though Ford had a distribution plan in the US through its Michigan plant, manufacturing the vehicle in Michigan was never a feasible option since the model was meant to serve a niche market with only marginal sales of around 50,000 per year.
This meant that the higher wages of workers in the North American region would not justify the small customer base that it was intended to serve.
The introduction of this model was in part due to the changing preferences of the American customer base whereby the average buyer is more inclined towards an SUV or a compact crossover which is why Ford has decided to ditch their sedan lineups in the US in favor of compact crossovers in the US and the Focus Active was a step in that direction.
Ford had originally planned to manufacture the Focus Active in Mexico but eventually decided on a Chinese plant due to available manufacturing capacity at the particular facility.
All hope for the Focus Active is not lost yet, since there is still a chance Ford might actually be able to manufacture the automobile in Mexico after all, especially since cars manufactured in Mexico are not subjected to US tariffs.
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