Forum List » Guru News and Commentaries
Guru News, Stock picks and commentaries
New Topic
Goto Thread: PreviousNext
Goto: Forum ListMessage ListNew TopicLog In
Ford Could Nearly Double Its Market Share in China by 2015
Posted by: Sarfaraz A. Khan (IP Logged)
Date: December 11, 2013 10:24AM

The U.S. automaker Ford (F) has recently released its U.S. sales numbers for the month of November. Overall sales in the region grew by 7% from prior year to 190,449 units while retail sales rose by 9% to 147,021, which is the highest level for retail sales since November, 2004. Passenger cars sales grew by 6%, while its best-selling pickup in the U.S., the Ford F-Series, delivered another strong performance with a 16% year-over-year increase in sales. In its most recent quarterly results, Ford reported a 12% increase in revenues to $36 billion due to higher sales in the U. S. and Asia Pacific, which offset the decline coming from Europe. In China, the world’s biggest auto market, the company is aiming to increase its market share from 3.2% in 2012 to 6% by 2015. The company will face increasing competition from General Motors (GM) as well as Japanese rivals, but Ford can deliver on its promise due to its massive expansion plans.

Strong Performance In China

Ford was a late entrant to the Chinese market, which is dominated by General Motors as the biggest foreign player in China. By the end of third quarter, Ford enjoyed a 4.3% market share in China, which is significantly below General Motor’s 14% share.

In the month of October, GM witnessed a 12.2% increase in sales to 282,446 vehicles. During this period, the company sold nearly three times more vehicles than Ford (discussed below).

Last month, Ford also released the October sales figures for China. On a wholesale basis, Ford sold 93,969 vehicles in China, showing an impressive growth of 55% from the same month last year. Moreover, since the beginning of the year, its sales have been up by almost 52% to 741,818 vehicles in the first 10 months of 2013. This is a solid performance since in the first 10 months, the company’s sales in China have already surpassed the total number of vehicles sold in 2012 by nearly 115,000 units.

This strong performance in China was due to the increasing demand for the Ford Focus and better performance from its joint ventures. Focus sales in October rose 18% to 39,710 vehicles, showing an impressive increase of 48% in the first 10 months of 2013. In addition to that, SUV demand in the country is also quite high and Ford has capitalized on this by selling 9,604 units of Ford Kuga, which is more commonly known as Ford Escape in the U.S. and 6,484 of EcoSport in October. The high demand for SUVs also bodes well for other vehicles, such as Explorer and Edge. Similarly, its large family estate car Ford Mondeo, which was launched in China in late August, has also performed very well with sales of 7,805 units in October.

In the meantime, Ford’s joint ventures in China, called Changan Ford Automobile (CAF) and Jiangling Motors Corp (JMC) also depicts the impressive growth of 61% and 36% respectively for the month of October. CAF is a passenger car joint venture while JMC is its commercial vehicle joint venture.

Increasing Competition from Japanese Rivals

The American automakers in China, such as Ford and General Motors (GM) have capitalized on the anti-Japanese sentiments in the country fueled by the island's dispute between China and Japan. The dispute led to the plummeting sales of Japanese vehicles in the country as their American rivals increased their market share. However, Japanese car sales have bounced back during October. The leading Japanese automaker Toyota (TM) saw sales soar by 81% to 82,400 vehicles, while Honda (HMC) tripled its sales in the country to 75,150 units. As the sentiments further abate, both Ford and General Motors will feel the rising heat of the competition as the Japanese vehicle manufacturers will try to win back the lost market share.

Future Plans

As mentioned earlier, Ford has planned to increase its market share to 6% by the end of 2015. Although the competition will be tough, China is a rapidly growing market with a improving economy which will provide significant growth opportunities.

The vehicle sales in the country are expected to touch 32 million units by 2020. To tap into this growing demand, Ford has planned to expand its operations. Ford will open seven new assembly and engine plants in China in the coming years. Moreover, by 2015, Ford will launch 15 new models and 20 new engines and transmissions in the country by 2015. In short, the company will significantly increase its product offering and capacity in the coming years.

The Chinese city of Chongqing is home to Ford’s second largest manufacturing capacity, after Southeast Michigan. Here, through its joint venture with CAF, Ford is eyeing rapid expansion in the next couple of years. CAF currently has two passenger car assembly plants while two new facilities are currently under construction which will significantly improve its capacity. One of these new plants is the $600 million Chongqing 3 facility, which will come online by 2014. The plant can produce around 300,000 vehicles annually. Hangzhou is the other new plant which is a result of $760 million investment. With these new developments, by 2015, CAF’s annual capacity will increase to over 1.2 million vehicles.

Meanwhile, as expected, Ford has now increased its share in Jiangling Motors Corp, which makes Ford’s vans as well as light trucks and SUVs, to 32%, which is the maximum allowed by regulators, after increasing it to 31.5% earlier in April. Ford’s shareholding now represents 2% of the company’s aggregate issued shares.

Disclosure: This article was written by Sarfaraz A. Khan, with valuable contribution from Gohar Yousuf, research assistant at Half Bridge Business Review. Neither Sarfaraz A. Khan, nor Gohar Yousuf have any positions in the stock(s) mentioned in this article.

Stocks Discussed: F, GM, TM, HMC,
Rate this post:

Rating: 2.0/5 (1 vote)

Sorry, only registered users may post in this forum.

Please Login if you have an account or Create a Free Account if you don't
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GF Chat