Jun 8, 2010

Private Label Manufacturing in the Automotive Industry -- Ford, Changan

Let's talk...Automotive News, June 7, 2010, just released a report that indicated Ford Motor Company, www.ford.com , is broadening its relationship with Chongqing Changan Automobile of China. According to the report, Ford is considering allowing Changan to private label a mid-size vehicle built in China using Ford technology. Who are the winners and losers? Let's take a look...

If this agreement proceeds, Ford will WIN in the short term by gaining cash from increased sales of the (Ford) Changan mid-size vehicle and by gaining access to more of the Chinese automobile market, even if it is by private label. Ford could WIN in the long term if they are able to manage the relationship and retain value for their own brand.

Changan will WIN in the short term as they will be able to utilize Ford technology to jumpstart their access to the mid-size vehicle market. Changan will also WIN in the long term as they will have access to current technology and a reduction in barriers to entry into the mid-size vehicle market. Changan also gains credibility by piggy-backing off the Ford Motor Company brand.

Ford may LOSE in the long term as they may be creating a competitor for their own products in the mid-size category. Over time, their sales in this category could be significantly affected by increased competition and reduced barriers to entry.

The use of private label as an effective marketing tool for automotive manufacturers can be a successful strategy as long as the products produced do not directly compete. The products also need to be easily differentiated by the consumer.

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