DETROIT (Reuters) – Ford Motor Co (F.N) has abruptly killed a plan to sell a Chinese-made small vehicle in the United States because of the prospect of higher U.S. tariffs, the head of the automaker’s North American operations said Friday.
The automaker’s decision came as U.S. President Donald Trump is escalating a trade battle with China, threatening to impose duties on another $200 billion in Chinese goods.
The Trump administration has already imposed duties on Chinese-made vehicles of up to 25 percent. Trump is separately evaluating a proposal to impose tariffs on all imported vehicles on national security grounds.
The Chinese-made Focus Active, which Ford calls a crossover, would have been a niche vehicle for the United States, and the decision to abandon plans to launch it in the U.S. market next year will not cost jobs or have a significant impact on the automaker’s U.S. sales, Ford North America chief Kumar Galhotra told reporters during a conference call on Friday.
“It basically boils down to how we deploy our resources,” Galhotra said. Given the prospect of high tariffs, the Focus Active’s costs in the U.S. “would be substantially higher.”
Asked when the decision was taken, Galhotra said, “we just made it. Literally.”
Plans to build and sell the Focus Active in Europe and China will move ahead, Galhotra said.
Ford’s decision to abandon the Focus Active contrasts with the effort by rival General Motors Co (GM.N) to seek an exemption to new, 25 percent U.S. tariffs on its Buick Envision utility vehicle.
The Envision is a larger vehicle than the Focus Active, with a starting price of about $35,000. Ford had not set a U.S. price for the compact Focus Active, but it would have competed in a segment where prices start at around $20,000, leaving less profit margin to absorb additional import duties.
Ford and its rivals also are closely watching the outcome of negotiations toward a revised North American Free Trade Agreement, which continued on Friday. A Ford spokesman declined to comment on proposed changes to NAFTA auto trade rules, and Galhotra did not address them.
Ford in April said it would drop most of its traditional passenger car models for the North American market, and dropped an earlier plan to import Focus sedans from China.
About 95 percent of the vehicles Ford sells in the U.S. are assembled in the U.S., Canada or Mexico, Galhotra said. The company U.S. dealers get the EcoSport small sport utility from India and Transit Connect small vans from Spain.
“At the moment we do not see any significant risk to those products,” Galhotra said.
Reporting By Joe White; Editing by Marguerita Choy