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Ford Kick Starts the Year on a Solid Note
Posted by: Analyse360Degree (IP Logged)
Date: March 10, 2014 01:28AM

Ford (F) had never shown so much of interest in China until in the recent past when the company started registering incredible growth. Volkswagen (VLKAY) and General Motors (GM) have been the biggest foreign auto giants in this emerging nation. In comparison Ford is a tiny player, but it’s sensing tremendous potential in this market where auto sales are estimated to shoot.

China calling
The budding nation’s auto industry grew at an unbelievable rate of 24% between 2005 and 2011, and in 2010 the country’s auto sales surpassed that of the U.S. to become the world’s largest car market. The mainland has become the dream destination for any auto major.

According to McKinsey, sales gain is expected to mellow down to 8% a year, and in 2020 China’s car sales are estimated to hit the 22 million mark. This is still higher than any developed economy including the U.S. and Europe. This is precisely why carmakers are concentrating on this growing region and pouring in billions to set up more facilities and augment capacity to cater to the rising demand.

The Blue Oval’s February feat
The second largest U.S. automaker along with its joint venture in China delivered 73,040 vehicles in February, up 67% on a year on year basis. The Detroit giant makes vehicles in collaboration with local players Chongqing Changan Automobile Co Ltd, and Jiangling Motors Corp. The past few months have seen staggering sales gain with December reporting 35% jump, and January registering a handsome 53% rise. In the current year, Ford has sold 167,506 cars or 59% more than what it sold in the first two month of last year.

Almost the entire credit goes to Ford Focus, the top selling nameplate of 2013. Ford Mondeo is also witnessing spectacular response from Chinese buyers. Undoubtedly such solid performance in the first two month is a big boost to the automaker that now expects to sell more than a million vehicles here through the year. This is quite an improvement given the meager scale at which Ford used to earlier operate in the country.

Make hay when the sun shines
With encourage outlook in China, Ford is pursuing to increase its footprints in the country. The carmaker is investing $100 million in the R&D facility situated at Nanjing. The company would employ 200 employees every year through 2018. The move is part of Ford’s expansion plan of increasing work capacity and setting up two new facilities at Chongqing by this year end. Additionally, Ford partnered with telecom giant China Mobile (CHL) to integrate the Lingxi and Fetion apps in Ford Focus and Ford Fiesta by this year end.

Last word
China is a huge platform for the company as it offers great opportunity to the automakers. But the fact that Ford is not the only carmaker eyeing a bigger pie, and that competition is getting fierce can’t be disregarded. This adds a lot of spice to the situation. What remains to be seen is whether Ford would be able to tackle its growing success in the mainland while competition intensifies.



Stocks Discussed: F, VLKAY, GM, CHL,
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