Ford Motor (F, Financial)'s strong performance in China for the first half of 2016 indicates the mainland’s growing importance in the company’s overall financials. The company, in collaboration with its joint venture partners in China, sold a mammoth 577,097 units in the first half, up 6% year over year. Its luxury brand Lincoln sold 12,450 units during the period, almost three times more than in the same period last year.
As far as June is concerned, the company’s sales surged 3% to 85,105 vehicles. Dave Scotch, the company’s group vice president and president of Asia Pacific, said in a statement, “We continue to see solid growth in China during the first half.”
He added, “Even as the pace of growth slows and the market matures, customers continue to respond well to our products, particularly our world-class SUV lineup.”
A detailed analysis of how the company performed in June as competition intensifies is below.
Ford Motor’s growth in China
An encouraging sign for the company is that the demand for its SUVs remained robust through the first half of the year. This is expected to boost the company’s bottom line in the second quarter. The collective sales of Ford EcoSport, Kuga, Edge Everest, Explorer, Lincoln MKC, MKX and Navigator came to 150,000 units, which represent an increase of 27% as compared with the first half of the previous year.
Lincoln continues to put up a good show in China with second quarter sales seeing solid growth of 160%, as the company sold close to 7,000 units during this period in comparison to last year. China is going to be an important market for Lincoln, particularly as the luxury brand is losing its position in America.
Ford’s joint venture for passenger vehicles, Changan Ford Automobile (CAF), witnessed impressive first-half sales at 434,645 vehicles, which represents a 10% increase year over year. In June, CAF sales surged 4% to 64,377 vehicles.
On the other hand, Ford’s commercial vehicle alliance, Jiangling Motors Corporation (JMC), witnessed a 7% downfall in sales in the first half of the year as it sold 121,514 vehicles. However, its June operations spiked 5% to 19,351 units sold.
Intensifying competition
Though China has been a sluggish auto market in the last two years, global automakers have enjoyed double-digit sales growth in earlier years and are hopeful for the economic situation to turnaround favorably. Even though the market is a bit dull, demand for SUVs, crossovers and luxury vehicles has remained resilient. In addition, this Asian country is currently the largest auto market in the world and offers huge potential to grow. As such, competition has been intensifying in China where carmakers are trying to cement their dominance for a greater share of the market.
Ford is relatively a new entrant in the economy in comparison to General Motors (GM, Financial), Volkswagen (VLKAY, Financial), Toyota (TM, Financial) and Honda Motor (HMC, Financial). Though Toyota’s sales declined 3.4% to 97,100 in June, they are still higher than Ford’s. Toyota’s first half sales stand at a commanding 592,100 units, up 16% over last year.
Toyota’s crosstown rival Honda Motor, on the other hand, reported a remarkable sales increase of 31.8% to 96,692 vehicles for June. As far as the company’s performance in the first half of the year is concerned, Honda sold 17.7% more vehicles by selling 542,527 vehicles.
Last word
Though competition is heating up, Ford is optimistic about its prospects in the country since its product portfolio, particularly the SUV lineup, has been receiving positive response from the Chinese population. Also, as the car ownership ratio is fairly low at less than 100 per 1000 people in China, the economy provides huge room for growth for all automakers.
Disclosure: I do not hold any position in any of the stocks discussed in this article.
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