Ford Motor Co. (F, Financial) reported strong August sales in China. The Detroit automaker is betting heavily on China. Leaving behind the poor performance in the second quarter, the company managed to bounce back posting back-to-back sales gains in July and August.
The company’s China sales for August spiked 22% to 96,450 units as compared with August 2015. The sales gain was powered by robust sales of SUVs and small sedans. The automaker said demand was strong not only for the new Edge SUV but also for Ford and Escort models.
Talking about the year-to-date performance, sales amounted to around 750,000 units for Ford and its Chinese joint ventures, Changan Ford and Jiangling Motor Corp. (SZSE:000550, Financial). This is an improvement of 8% as compared with last year's comparable period. The last two months have been crucial for the company considering its narrowing market share and second-quarter profits in the mainland.
China CEO Mark Fields brought about strategic changes to mend the situation in the world’s hottest car market, and the result was a remarkable pickup in numbers for July and August. Here’s a brief look at Ford’s performance in the Asian economy.
A snapshot of the numbers
Changan Ford sold 75,228 vehicles in August, up 22% from the same period last year. The incredible sales were powered by the solid performance of the recently revamped Focus compact, which saw sales up 92%; Escort compact, whose sales surged 49%, and the revamped Edge crossover SUV, whose sales spiked more than threefold. Year-to-date sales for Changan Ford came in at 578,947 units, up 13% compared to last year.
Jiangling Motors sold 19,951 vehicles in August with sales climbing 16% year over year. In contrast, Jiangling’s sales during the eight-month period through August were down 3%. The combined sales of Lincoln, Ford Mustang, Focus and Fiesta amounted to 1,271 vehicles.
The road ahead
Ford Motor’s market share has been sliding in China in the first half of 2016 on account of increasing competition from homegrown players. Domestic players are offering quality vehicles at highly competitive rates, thereby eroding the market share of larger players. Ford is not the only one suffering from increasing competition from local players; crosstown rival General Motors (GM, Financial) is also experiencing a challenging market. Local players are targeting the affordable car segment, primarily crossovers and SUVs that are selling like hot cakes in the Asian economy.
Ford is also putting in efforts in the crossover segment with the Kuga Compact SUV, which sells as Escape in the U.S. Ford Ecosport is also performing well. But domestic players ate into Ford’s market share during the early half of 2016. Kuga sales were hurt by as much as 18%, which showed up in the Blue Oval’s bottom line from the Chinese market. The company’s portion of equity income from its joint ventures dropped 28% to $296 million during the second quarter.
However, Fields assured investors the company is getting back on track. The company took aggressive steps, lowered costs and modified pricing and product mix to best match the ongoing trend. The company’s efforts starting showing results as sales volumes have picked up in the last two months.
Ford is making its presence felt in the global auto market and China is an important market for its overall investment strategy. In view of maintaining sales momentum, the company is looking forward to launch the all new Kuga SUV which may turn out to be an important factor for September sales. Let’s stay tuned for September figures.
Disclosure: I do not hold any position in the stock/s mentioned in this article.
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