If you want to build cars in China as a foreign automaker, you must first partner up with a local manufacturer. Guess what Ford just did?
Ford announced Tuesday that it signed a memorandum of understanding with Anhui Zotye Automobile Co., a Chinese automaker that builds a range of models, including zero-emission, battery-electric vehicles. The goal of this partnership is simple -- Ford wants to build a whole new line of electric vehicles in China.
Don't expect them to be called Fords, though. The cars will be built and sold under a local brand owned by the joint venture, so it might have Ford in the name, but it'll be a product of both groups, not just Ford itself.
Ford is no stranger to establishing joint ventures in China. In fact, it's already built two -- Changan Ford and Jiangling Motors Corporation. Considering Ford wants 70 percent of its Chinese vehicles to be electrified by 2025, it's going to need all the help it can get.
So what's with all these joint ventures? The answer can be boiled down to taxes. Automakers who import vehicles to China for sale face a 25 percent import tariff, which can make even cheap cars unaffordable to most. In order to bypass that, an automaker can establish a joint venture with a local company. The thinking is that the foreign OEM skips the taxes, while the local OEM gains valuable experience from outsiders.
China's car market is huge and there's a thirst for battery-electric vehicles over there. Ford isn't late to the game just yet, but with Daimler and other automakers already preparing to build EVs in China, Ford will need to hustle if it wants to capture a large corner of that market.