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Ford Sees Tremendous Growth in China
Posted by: Live investor (IP Logged)
Date: October 10, 2013 10:01AM

Ford Motors (F) is surprising car makers with the growth it is showing in the Chinese economy. It is preparing itself to overtake its Japanese and Korean rivals in the emerging economy. Automakers know that the next big spot for cars is China, which is the largest growing automotive market. Japanese car makers including Toyota (TM), Honda (HMC), Nissan (NSANY) and South Korea's Hyundai Motor have a good foothold in China. Even Detroit automaker General Motors (GM) has a huge presence in the mainland. In fact the largest U.S. automaker is the biggest foreign car maker in China. German automaker Volkswagen (VLKAY) also has a huge footprint in China.

Ford is way behind both General Motors and Volkswagen, but it is certainly capable of contending the Japanese auto players in the near future. The car maker is witnessing remarkable growth in the world’s biggest auto market.

Good Time to Overtake

Japanese automakers including Toyota and Honda are experiencing difficult times after the political conflict between China and Japan over a group of islands which brought anti-Japanese sentiments in the Chinese population. The economy therefore shunned Japan-based vehicles, and as a consequence Japanese car makers are witnessing softer sales in China. Both Toyota and Honda are struggling to regain market share, and in contrast Ford is making hay while the sun shines.

The second largest U.S. automaker aims to sell more vehicles in China than Toyota and Honda. It is presently working very hard to closely compete with Nissan. The Detroit auto giant increased its product lineup which helped it to boost sales. Ford introduced the revamped Focus and a couple of small SUVs. It recently launched a Chinese version of the Fusion, the redesigned Mondeo.

This year Ford is expected to sell around 900,000 vehicles in China. The company aims to capture 5% of the Chinese automotive market in the last quarter of the year. According to a company statement, China deliveries climbed 51% in the first nine months of 2013 to 647,849. Toyota has also set a similar target of selling over 900,000 vehicles in the mainland. Honda is expected to make approximately 750,000 deliveries in the year. Nissan, as per Nissan’s company executive who requested anonymity, is “stretching to achieve” its target of 1.25 million vehicles.

Expanding Far and Wide

Ford’s vice president of global manufacturing John Fleming said that the company has a massive expansion program of manufacturing 8 million vehicles globally, up from 6 million, by the middle of the decade. The automaker is scheduled to build nine manufacturing units in China and two in India by 2015. Although the Detroit maker emerged as the strongest auto giant post-recession, its focus in China came much later compared to fellow players. Ford entered China much later compared to both Volkswagen, which entered almost a decade before Ford, and General Motors, which was six years ahead of Ford.

Capturing the Asian market won’t be an easy task for Ford as the region calls for huge investment. But the car maker is focused pm doubling its capacity in China and expanding its lineup in the budding economy to bolster sales. The automaker has an investment plan of $4.9 billion in China.

General Motors and Volkswagen are the most dominant players in China and surpassing them would take a lot of effort. General Motors forecasts to sell more than 3 million vehicles this year with an expected growth of 8% to 10%. LMC Automotive estimates Volkswagen will deliver about 3.2 million vehicles in the current year.

To Conclude

Ford has been a laggard as far as the Chinese market is concerned. However, the company has been strengthening and expanding its product line in the past couple of years to catch up with other automakers. Ford is expected to continue with the current pace and expand its footprint in China. It is estimated to post even better sales in the next year. It would be exciting to see how the Blue Oval overtakes its fellow rivals and benefits from the growing economy.

Stocks Discussed: F, GM, TM, NSANY, VLKAY, HMC,
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