More Success for Ford in China

Eye-popping numbers from Ford in China: The Blue Oval's sales in the world's largest auto market in January were up 98% in January.

Better yet, sales at Ford's passenger-car joint venture - the venture that drives the bulk of Ford's China profits - were up a whopping 136%.

Sounds impressive, doesn't it?


It does, but don't be too impressed just yet. The truth is, those numbers aren't nearly as impressive as they sound.

But it was still a good month in China for Ford.

Apples to oranges
Why are those eye-popping gains not as impressive as they look? Because just like almost everyone else in the auto business in China this month, Ford's PR folks are comparing apples to oranges.

January of 2012 had fewer selling days than January of 2013. Here's why: Much of China shuts down for several days for the festivities around Chinese New Year. Sometimes, like in 2012, the New Year holiday falls in January. And sometimes, like in 2011 and 2013, it falls in February.

See what I mean? Sales in January 2013 were bound to look great in comparison to year-ago numbers. (And February's are bound to look dismal. Don't fret when that happens.)

But that doesn't mean it was a bad month for Ford. If we compare to January of 2011 - a record month for Ford in China at the time, though that record was eclipsed last month - we see a gain of just over 15%. That's not 98%, but it's not bad considering the lackluster state of the overall auto market in China between then and now.

And it could get a lot better soon.

A whole lot of Focuses, with more to come
While Ford already offers several models in China, to some extent the Blue Oval is a one-trick pony in the Middle Kingdom at the moment. About half of the vehicles Ford sells in China in a given month are versions of its Focus compact, which has - in two distinct flavors - rapidly become one of China's best-sellers.

I say "two flavors" because, although Ford rolls up their sales numbers into one impressive-looking total, the company sells two separate cars called "Focus" in China. The "Classic Focus" is the last-generation European car, offered as a value-priced model, and the "New Focus" is the current global car, positioned as a premium product.

As I said, the two Focus variants together account for about half of Ford's sales in China, but that could change soon. Ford said last year that it plans to greatly expand its offerings in China with 15 new models by mid-decade. The "New Focus" was the first of those, and another arrived in January: The Kuga SUV, a twin in all but name to the all-new Escape introduced here in the U.S. last year.

Ford wades into China's SUV wars
While the growth of China's overall auto market has been more or less flat for the last couple of years, more and more Chinese consumers have been opting for SUVs. It's definitely a growth market, one that Ford - with a lineup of several strong SUV models sold elsewhere - should be able to expand into with success.

Ford already sells its Edge SUV in China, though as an imported model it's subject to heavy taxes and isn't a strong seller. But the locally made Kuga should be a different story. The Kuga was launched last month, to positive reviews from local Chinese media. Reviewers compared it favorably to the Volkswagen Tiguan and Honda CR-V, both of which are strong sellers in China.

In coming months, Ford will add two more SUVs to the Chinese market mix. The EcoSport, a small SUV based on the Fiesta and originally designed for emerging markets, and the familiar-to-Americans Explorer (one of Ford's best products), are both set for launch in China in coming months.

The upshot: It still looks good for Ford in China
The ongoing success of the Focus continues to bode well for Ford's expansion plans in China. Those plans, which call for significant investments in the next couple of years to drive significant growth in the second half of the decade, are a key part of why I think Ford is still a buy right now.

Ford has been performing incredibly well as a company over the past few years -- it's making good vehicles, is consistently profitable, recently reinstated its dividend, and has done a remarkable job paying down its debt. The stock has recently moved up, and it appears investors have started to notice what Ford is doing right. Does this create an incredible buying opportunity, or are there hidden risks with the stock that investors need to know about? To answer that, one of our top equity analysts has compiled a premium research report with in-depth analysis on whether Ford is a buy right now, and why. Simply click here to get instant access to this premium report.

The article More Success for Ford in China originally appeared on Fool.com.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


Increase your money and finance knowledge from home

What is Short Selling?

Make a profit when stocks prices fall.

View Course »

Portfolio Basics

What are stocks? Learn how to start investing.

View Course »

Add a Comment

*0 / 3000 Character Maximum