The Automotive segment is a competitive market with companies like Ford (F, Financial) looking to establish a stronger foothold globally. Growth pattern in Asian market, mainly due to the rising economies and higher-paying capacity, is resulting in a brighter future of automakers. Companies like Ford are all set to write another success story by capturing the Asian market and also increase global footprint in the automotive segment.
The strong revenue exemplifies that Ford’s performance in the global arena is remarkable. Geographically the company recorded growth in profits and increased market share in the U.S., Asia Pacific and Africa regions. Revenue continues to ramp up on year-over-year basis for the fifth consecutive quarter. Results were gloomy in Europe where the economy is still in a recovery phase, while South America still faces loss.
Ford eyeing Asian market mainly India
With the  Asian economy rising in certain countries like India, automobile giants are now targeting this region to influence its top and bottom line by tapping the Indian market. Also India is now becoming a major hub for automobile manufacturers for exporting vehicles to other developing countries in Asia like China. India now represents one of the world’s largest automobile markets.
Some statistics that propel Ford to eye Indian market
The passenger car market is estimated to grow at a CAGR of 13% during 2012-2021. The export market in India for this segment is expected to touch $30 billion by 2020-21 as per ACMA (Automotive Component Manufacturers’ Association).
Premium sports utility vehicle demand will continue to grow and is estimated to reach 25,000 units annually in India.
Ford’s success with Ecosport in India
With the launch of Ford's Ecosport model, it recorded booking of 30,000 units in 17 days. It further continued to fill its order books to record 60,000 vehicles before it suspended any further booking to meet the existing order in books. The overwhelming response for this vehicle boosted Ford’s confidence, which enabled it to establish new plants in India.
Journey ahead
Ford anticipates flat revenue for the year 2014 with a positive cash flow as compared to last year. The operating profit of the company may range from $7 billion to $8 billion in the year 2014.
To meet the growing demand in Asian countries, the company plans to invest $1 billion as an expansion plan in India. Ford is establishing a new production plant, which is projected to be commissioned by the end of 2014 and production to commence in early 2015. Ford already has an existing unit in the southern part of India. Ford also plans to launch more than eight new models of cars in India, by end of 2015.
The European market for Ford is expected to improve this year as the country is recovering from the economic crash. Ford expects to move up in the European market with the economy recovering in various European countries.
Competitor
General Motors (GM, Financial) is in head-on competition with Ford in the global arena of cars. The company occupied a global market share of 11.4% in Q4 2013, down by 0.2% from the year ago quarter. The company was recently hit by a car recall for defect in the ignition switch. Earlier this year, the company recalled 1.6 million older cars globally for replacement of the defective switch. Adding insult to injury to GM is the Chevrolet Cruze small cars with 1.4 liter turbo engines. The company has suspended selling of this model for an undisclosed reason. GM will always be affected by such moves in terms of its bottom lines. The company is also hit by a pre-tax charge of $400 million in the Q1 2014, courtesy change in the exchange rate of Venezuelan currency Bolivar Fuerte.
Conclusion
Both Ford and GM are global leaders in the automotive segment. But from an investor's point of view, the recent setbacks faced by GM can be considered more favorable for an investor. Currently the stocks of Ford trade around $13.8 and with a narrow band of 52 week low high($13.26 - $18.12) can be favored by investors. PE of the company which is 9.01 is also impressive with an EPS of 1.54. The company also has a good dividend paying history and is increasing from last three years.
