As president of Ford Asia-Pacific and Africa, Joe Hinrichs is in a good place to view the booming auto market in China through extremely rose-tinted glasses.
Instead, the energetic young executive spends his time worrying: How will Ford, and the world, accommodate millions of new drivers? Part of the answer, he said from the recent China Plastics in Automotive conference in Guangzhou, is plastics.
The conference, which was organized by Plastics News Global Group, was held in advance of the 2011 Chinaplas Exhibition in Guangzhou.
Ford said its global sales will rise 50 percent by 2015 to 8 million annually, driven by expansion in Asia and growing demand for small cars.
“Between China, India and [Southeast Asia], 2 billion people will be able to afford a car and be of driving age by the year 2020,” he said. “There isn't enough oil or parking spots for all these people.”
Keeping them off the roads, according to Hinrich, is not the answer. “Who's going to tell people they can't have this freedom of transportation that people in the West already have?” The answer, instead, is to improve the cars. And, he said, “Plastics play a key role in all of that.”
Hinrichs highlighted Trexel's MuCell process, in which small bubbles are introduced into plastics, as an example of a way in which new materials can help to lighten cars while not compromising strength. Plastics can also help to save carmakers money, an important consideration in emerging markets where consumers are frugal. In some applications plastics enable carmakers to manufacture what were once several parts in a single mold.
These attributes particularly suit the markets Ford is looking to serve in Asia and Africa, said Hinrich. Although it has only 2.5 percent of the market share in China, Ford's growth in the Asia-Pacific region has skyrocketed in the last few years. During the last decade, the Chinese auto market has expanded nine times. In 2010, Ford's sales in China increased by 40 percent. In addition, the carmaker's sales increased by 200 percent in India and 136 percent in South East Asia. While China's market expansion has started to slow, Hinrich pointed out that even slow growth will maintain China's position as the largest and fastest-growing auto market in the world.
The market is also unique. Three-quarters of car buyers in China are purchasing their first car. The decision, he said, is often a group affair.
“Somebody who works for us just bought her first car and even the color was a family decision,” he said. “She wanted yellow, her parents wanted black — they ended up with blue.”
Chinese buyers are extremely price-conscious. Hinrichs said the average Chinese buyer is looking for something below $14,500.
In 2009, 90 percent of Ford's sales in China were made in cash. This means manufacturers looking to improve the environmental profile of their vehicles will be hard-pressed to convince consumers to bear the cost of electric or hybrid cars.
“There is a lot of focus on powertrain technology,” Hinrichs said. “But, the most important thing is the customer, and right now the customer isn't voting for those technologies.”
To find other ways of improving vehicles, auto manufacturers, suppliers and materials makers will all have to work on new innovations and technologies. “We're all part of this together,” he said.