By Deepa Seetharaman
HANGZHOU, China (Reuters) - Ford Motor Co and its Chinese partner will begin building its first factory on China's coast, where the U.S. automaker can easily access the country's growing number of affluent buyers.
The $760 million factory is one of five Ford is building to cement its place in the world's largest auto market. Ford is also building a third assembly plant at its manufacturing hub in the central Chinese city of Chongqing.
Building vehicles in Hangzhou - a city of more than 6 million people to the south of Shanghai - draws Ford closer to China's wealthier population along the coast. It also provides Ford with an accessible port so it can export vehicles in the future, although Ford said it is now focused on building cars for the Chinese market.
"Hangzhou is really critical because of the market that it serves, and it diversifies our operations," Chief Executive Alan Mulally said after a groundbreaking event in Hangzhou on Wednesday. "The customer base here is fantastic."
Since 2006, Ford has poured nearly $5 billion into China with the aim of doubling capacity, employees and dealers by 2015. The plant in Hangzhou will be able to build 250,000 vehicles when it opens in three years.
GRAPHIC: Ford in China http://r.reuters.com/gek32t
Ford is the latest in a long list of automakers vying to launch or expand top-tier brands in China, where luxury car sales are expected to surpass those in the United States within 8 years. It plans to bring its Lincoln brand to China by 2014.
At an event at a converted Buddhist temple in Beijing on Tuesday, Ford executives said Lincoln could win over buyers partly by drawing on its legacy of building iconic cars like the Zephyr and Continental. But they also said China represented a rare chance for Lincoln to reinvent itself and skirt past its stale image, which has hurt sales in the United States.
"We have a chance to be different here," Ford's global marketing chief Jim Farley said. "We see the opportunity in China for the first time to launch Lincoln from scratch. China could teach us things we could incorporate into the experience side in North America."
By offering a premium car with Lincoln, Ford could be more attractive to dealers, helping the company gain traction in the Chinese market, Booz & Co consultant Bill Russo said.
LOW-COST APPEAL, TOO
The U.S. automaker is also launching 15 Ford brand models to China by 2015. One of those will be a low-cost car to appeal to buyers in China's fast-growing cities in the West. That model will rival the Chevrolet Sail, a car developed by General Motors and its Chinese partners that sells for less than $10,000.
Earlier this week, Mulally and other top executives marked another groundbreaking of the automaker's third assembly plant in Chongqing, home to Ford's massive manufacturing hub.
The complex is close to China's rapidly developing inland cities, where Ford is looking to win buyers with low-cost models.
Ford chose to build a factory along China's east coast after deciding to break up its three-way tie-up with Japan's Mazda Motor Corp <7261.T> and China's Changan Automobile Co Ltd.
China approved that restructuring, which carves up the joint venture assets between Mazda and Ford, earlier this week and it is now being reviewed by Chinese regulators. Mazda was not involved in selecting a site for the factory.
"This was a Changan Ford decision and a Changan Ford process," Joe Hinrichs, Ford's head of Asian and African operations, told Reuters.
(Reporting by Deepa Seetharaman; Editing by Ian Geoghegan)