By Trefor Moss

SHANGHAI-- Ford Motor Co. will build its iconic Mustang vehicles in China for the first time, the company said Thursday, as it tries to reconnect with Chinese consumers.

The locally built Mustang Mach-E, Ford's flagship electric vehicle, which recently went on sale in the U.S., will be available in China later this year and challenge for a share of the Chinese high-end EV market, according to a company statement.

That's fast becoming a crowded space. Earlier this month, Tesla Inc. started delivering its locally built Model Y--the second vehicle after the Model 3 produced at its Shanghai factory. Also this month, Volkswagen AG said it would soon begin delivering the first EVs produced at two newly built Chinese factories dedicated to electric cars.

Three Chinese premium EV startups, NIO Inc., Li Auto Inc. and XPeng Inc., started gaining traction last year. The companies, all listed in the U.S., together delivered nearly 45,000 vehicles in China in the October-December quarter. NIO recently unveiled a new electric sedan, its fourth production model.

EV sales are expected to grow strongly in China. The government is targeting to sell around 5 million EVs annually by 2025, or a fifth of total vehicle sales. There were 1.11 million electric cars sold in China last year, according to the China Passenger Car Association, accounting for nearly 6% of the country's car market.

The electric Mustang starts at $42,895 in the U.S. and has generally impressed critics, though some have questioned whether a sport-utility vehicle should rightly bear the Mustang nameplate, which has traditionally been associated with sporty two-door coupes and convertibles. Ford hasn't said how much the car will cost in China.

The Mach-E offers Ford a chance to enthuse Chinese consumers again after years of sluggish sales caused in part by a vehicle range that had, by Ford executives' own admission, grown too stale as the Dearborn, Mich.-based company struggled to keep pace with the fast-moving China market. Mustangs have so far only been available in China as costly imports. Producing the car locally will allow Ford to save shipping costs and avoid import duties.

Ford's China sales increased 6.1% year-over-year to 602,627 vehicles in 2020. But that was still down significantly from the 1.27 million vehicles the company sold in the country in 2016, its peak year in China.

The company launched its first made-in-China Lincoln vehicles in March last year. Lincoln's China sales increased by a third to 61,700 last year, though the brand remains a minor player in the Chinese market compared with premium rivals such as General Motors Co.'s Cadillac and the still larger German trio of Audi AG, Bayerische Motoren Werke AG and Daimler AG's Mercedes-Benz.

Nearly two years ago the company launched "Ford China 2.0," a new strategy designed to improve its fortunes in the world's biggest car market that involved the appointment of a mainly Chinese leadership team and promised more products tailored to local tastes.

Write to Trefor Moss at Trefor.Moss@wsj.com

Corrections & Amplifications

This item was corrected on February 3, 2021 to reflect that the electric Mustang starts at $42,895 in the U.S. The original version incorrectly said the starting price for the electric Mustang was $49,700 in the U.S. in the sixth paragraph.

(END) Dow Jones Newswires

01-28-21 0600ET