Can Ford Challenge GM in China?

China still remains a hot market for automakers. At least that's what sales figures for the month of April suggest. But while Ford's (NYSE: F  ) numbers were impressive, General Motors (NYSE: GM  ) disappointed in some areas.

Hopes for Ford
Ford is upbeat, and why not? Its all-new Focus seems to have found favor in China. The recently launched New Focus is the first of 15 new vehicles the company has planned for this market, and it played a big role in driving up the company's April sales by 24%.

That's certainly a big boost for the Blue Oval, which has been pumping billions into the Middle Kingdom to catch up with rival GM. Ford's total investment in the nation has nearly reached the $5 billion mark. That's huge, and makes a lot of sense, too, given the growth potential of the Chinese auto market. The company will now experiment with some SUVs, which have become increasingly popular, to capture the nation's attention.

Ford's China sales in the first four months of the year are still down 5% from the comparable period last year, which doesn't look good when compared to GM's 9% or Toyota Motor's (NYSE: TM  ) 14% jump (as reported by Reuters) during the same period. But if the Focus continues to do well, it won't take Ford long to turn things around. But while Ford is making merry in China, GM has some issues to deal with.

Concerns for the General
GM's sales in China have shown strong resilience to a slowdown, hitting record monthly sales consistently. April was no different, with a record number of vehicles sold. Sales were 12% higher from the year-ago period.

But what caught my eye was the 6% slip in sales of its Chevrolet brand. After rising 11% in March and 24% in February, both from comparable periods last year, the dip in April came as a surprise.

Another point of concern was its luxury brand, Cadillac. While German luxury brands continue to make money in China, with Audi selling over 34,000 units and reporting a whopping 44% jump in sales for April, Cadillac is barely visible. It sold just a little over 2,000 units, and worse, sales were 20% lower from last year.

It's a huge disappointment for GM, particularly when it has planned four new Cadillacs for the market, targeting annual sales of 100,000 units by 2016. Given the painful pace of the car's current sales, will GM be able to reach its target? Some analysts say it's a problem with the product, some say the design. Whatever it is, April numbers should shake GM up, because it really needs to pull up its socks if it wants to give Audi or BMW a tough time in China.

The Foolish bottom line
GM is way ahead in China, having sold 227,217 units in April alone. Ford's 54,881 units pale in comparison. But if Focus finds more takers, Ford might soon be nipping at the heels of competitors like Toyota, which sold 81,700 units in April.

GM and Ford aren't the only American companies looking to China for growth. Several companies are finding strong growth thanks to savvy execution in the world's fast-growing markets. Motley Fool analysts have identified three big-name companies that are particularly well-positioned to profit, and you can learn more right now with our new free report: "3 American Companies Set to Dominate the World." It's completely free for Fool readers, but only for a limited time -- so grab your copy now.

Fool contributor Neha Chamaria does not own shares of any of the companies mentioned in this article. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of Ford and General Motors, as well as creating a synthetic long position in Ford. The Motley Fool has a disclosure policy.
We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (0) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1890952, ~/Articles/ArticleHandler.aspx, 11/27/2014 1:49:14 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement