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Ford’s Sales in China are Surging

July 22, 2014 | About:

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Ford's (NYSE:F) China sales rose 35% to 549,256 vehicles this year through June, as the automaker dramatically increases its presence in the world's largest auto market. For Ford, whose sales also increased 17% in June, the results are an encouraging sign that it is beginning to catch up with GM and Volkswagen in China. Ford's passenger car joint venture, called Changan Ford, reported a 39% increase in sales for the first half to 286,433 units. The unit's Ford Focus sales rose 9% for the half to 185,648.

The company's Jiangling Motors Corp., a commercial vehicle unit in China, recorded a 21% sales increase in the first six months to 132,938 vehicles. Ford last month also launched 88 new dealerships across China in one day, taking its total count of dealer points in China to 750.

Surpassing Other Competitors

Ford is working hard to become a significant presence in China, in fact it surpassed Honda (NYSE:HMC) and Toyota (NYSE:TM) in sales volume last year, for a total volume of 935,813 commercial and passenger vehicles. The company tripled the number of models offered in China last year compared to 2012. The domestic automaker sold 16,576 commercial vehicles through its joint venture with Jiangling Motors Corporation (JMC). Nanchang-based JMC and Ford manufacture the Ford Transit van for the Chinese market.

Ford arrived late in China, where General Motors Co. (NYSE:GM) and Volkswagen AG are the dominant foreign players. The company said it will have 24 plants in Asia, up from 14 in 2012. Ford captured 3.2 percent of the Chinese auto market and is aiming for 5 percent by the end of this year.

China Becoming a Big Market

Four years after China became the world’s largest auto market, the pace of growth has been relentless. Last year, Chinese consumers bought about 2.7 million more new domestic and foreign brand vehicles than American buyers. In the first six months of this year, the Chinese market leads by almost 3.7 million. At the same time, new-car sales in China so far this year are expected to come in at about 11.81 million, about 9 percent growth.

Car sales in China don’t give up the same profit margins, since many of the vehicles made under these joint ventures are targeting middle and lower-middle class buyers. But high volume can make up for at least part of what’s lost in profit and automakers are banking that China’s growing middle class will continue to strengthen the appetite for high-margin luxury cars and SUVs. “We continue to grow our sales network, increase capacity and hire great employees,” said John Lawler, chairman and CEO of Ford China, in a statement.

Last Word

China is an extremely important growing market for Ford and its domestic rivals. In recent years, Detroit automakers have invested billionsin an attempt to capture what is expected to be a 30-million-vehicle market by 2020. With business in China growing quickly, Ford is expanding its presence in the country by investing $100 million in its research and development facility in Nanjing.

The move will include hiring about 200 employees a year through 2018 as Ford adds a test track and other capabilities to its Nanjing operations. The expansion of research and development in China comes as Ford prepares to open two new plants in the country this year.

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