SHANGHAI— Ford Motor Co. F -0.35% said Thursday that it would start building electric cars in China to tap into a state-sponsored boom in green-energy vehicles.

In doing so, the Detroit-based company signaled that it had swallowed industry concerns about bringing proprietary electric-car technology to China, despite misgivings among foreign auto makers about intellectual-property protection in the world’s largest auto market.

“It’s manifest destiny” for foreign car makers to get past those fears and start building electric cars in China, said Bill Russo, managing director of Gao Feng Advisory, a Shanghai consulting firm.

Mass uptake of electric vehicles is set to happen in China first, he said, “and none of those companies can afford not to be relevant to the future of their industry.”

Ford’s local joint venture Changan Ford Automobile Co. will start building the Mondeo Energi plug-in hybrid vehicle in China next year, with a new all-electric sport-utility vehicle set to follow within five years, the company said in a statement.

Electric powertrains will be manufactured locally by 2020, and by 2025 all of Changan Ford’s vehicles will come in electrified versions, it said.

“The time is right for Ford to expand our EV lineup and investments in China,” said Chief Executive Mark Fields.

China is already the world’s largest market for electric vehicles, with over half a million electric or hybrid cars sold there last year, according to the China Association of Automobile Manufacturers.

The government is encouraging their uptake by heavily subsidizing electric cars through payments to manufacturers, which are then able to sell EVs more cheaply. It is also far easier to obtain a license plate for an EV than for a traditional gasoline car in congested cities like Beijing and Shanghai.

Local authorities have also set ambitious targets for electrifying bus and taxi fleets over the next few years, and for the rollout of EV charging facilities.

There could be as many as 32 million new energy vehicles in China by 2025, according to Gao Feng Advisory—a total that is likely to be a substantial share of the global fleet, with uptake of EVs in the U.S. and Europe happening more slowly.

Yet while most gasoline cars sold in China are built by foreign auto makers operating through local joint ventures, almost all of the electric cars sold in China last year were made by Chinese companies operating without foreign input.

Silicon Valley electric-car maker Tesla Inc. was the one notable exception: Without disclosing how many cars it had sold, the company said in a March 1 filing that its 2016 revenue topped $1 billion in China for the first time last year, leading auto-industry analysts to estimate China sales of around 11,000 imported vehicles. Chinese tech company Tencent Holdings Ltd. last week revealed it had taken a 5% stake in Tesla.

Imported cars incur a 25% tariff, making them less competitive, and so auto makers naturally want to build in China, said Michael Dunne of Hong Kong-based Dunne Automotive. But they have been holding out for some relaxation of China’s strict joint-venture rules before committing to large-scale EV manufacturing in China, he said.

Foreign car makers and the Chinese authorities have been “sitting around the poker table”, said Mr. Dunne.

It’s the foreign car makers who appear to have blinked.

In March, Buick, a unit of General Motors Co. , announced plans to start building plug-in hybrid and electric vehicles in China. Last year, GM said it wanted to have 10 new energy vehicles in China by 2020, though it has yet to reveal any plans to start manufacturing its highest-profile EV, the Chevrolet Bolt, in the country.

Last year, Volkswagen AG said it was in talks with local car maker China Anhui Jianghuai Automobile Co. about setting up a joint venture to build EVs.

Write to Trefor Moss at [email protected]

Appeared in the Apr. 07, 2017, print edition as ‘Ford Plans Electric Vehicles In China.’