Ford Motor Company (F): The Automaker’s New Engine Is All About Winning in China

Ford Motor Company (NYSE:F) announced a new member of its fuel-efficient-engine lineup last week.

Ford Motor Company (NYSE:F)It’s a new 1.5-liter four-cylinder that’s turbocharged, the latest member of Ford Motor Company (NYSE:F)’s “EcoBoost” family of engines that use advanced turbocharging to give smaller engines more power while saving gas.

It should be a good product, but at first glance it raises a question. Ford Motor Company (NYSE:F) already has a similarly sized EcoBoost engine, a 1.6-liter power plant that is featured in vehicles like the Escape SUV and the hot-selling new Fusion sedan, pictured above. The new engine is somewhat more efficient, and a bit more high-tech, but it’s pretty similar.

So why did Ford Motor Company (NYSE:F) go to the trouble of developing and producing an all-new engine that is so similar to an existing model?

The answer has a lot to do with China, where Ford has big plans to expand – and with a worldwide shortage of engines that may be holding up sales of Ford Motor Company (NYSE:F)’s hottest new model.

Ford needs more engines for its hot models
One of Ford’s biggest challenges in recent times has been meeting customer demand for its latest new products. With many of its plants already working three shifts, Ford has found it hard to increase production – even as its striking new lineup of products are bringing lots of new buyers to its dealers.

One of the “chokepoints” in Ford Motor Company (NYSE:F)’s production has been that 1.6-liter EcoBoost motor; it’s in short supply, thanks to the popularity of both the Escape and the Fusion. With Escape sales picking up overseas (where the model is known as the Kuga), Ford’s engine plants were having trouble keeping up with demand.

That constraint may have actually held back sales of the Fusion, a well-executed sedan that is nonetheless cutting into the sales of class leaders like Toyota Motor Corporation (ADR) (NYSE:TM)‘s Camry. That’s where the new engine comes in: It’s expected to take the place of the 1.6-liter engine in the Fusion, making it easier for Ford to make more of both the Fusion and the Escape.

But why not just make more of the existing 1.6-liter engine instead? That’s where China comes in.

Why China had a lot to do with Ford’s latest power plant
Ford is in the process of rolling out its hot Fusion in markets around the world. It’s set to debut in May in China, where it will be called the Mondeo – and where it will be the first Ford to feature that new 1.5-liter EcoBoost engine.