Ford's Great Drive in China

It's true that the Chinese auto market has slowed dramatically, and the eye-popping double-digit gains of just a few years ago are starting to seem like ancient history.

It's also true that Ford (NYSE: F  ) was a very late entrant in the crowded, chaotic market, spotting a huge lead to giants like General Motors (NYSE: GM  ) and Volkswagen (NASDAQOTH: VLKAY  ) .

And it's also true that even after big investments, Ford's market share in China still trails most of its big-name global rivals.

But here's another truth: Ford has made big gains in China lately.

Ford's focus in China
September was Ford's best-ever month in China, with almost 60,000 vehicles sold. While that's a modest total compared with Ford's sales in markets like the U.S., it represents a 35% increase over year-ago levels – even as Ford is still in the process of rolling out its full product line to Chinese consumers.

But there's little doubt that the Chinese like what they've seen so far from Ford, particularly in the compact segment. Over half of Ford's September sales – 33,587 units – wore the Focus nameplate. Ford sells two variants of its Focus in China: The last-generation car, called "Classic Focus," and the familiar current car, called "New Focus" and positioned as a premium offering.

Those two have combined to make "Ford Focus" the best-selling nameplate in China for the month, according to analyst Matt Gasnier of the Best Selling Cars Blog. It's also the No. 3 seller for the year to date through September – despite the fact that the New Focus was introduced in China in May.

The New Focus was the first of 15 new models that Ford plans to introduce to Chinese consumers over the next couple of years. Its success bodes well for the models still to come – and for Ford's huge investments in the country.

Big investments in future growth
Ford's U.S. sales have been flat in recent months; the company is bumping up against the edges of its current North American production capacity as it has been reluctant to invest heavily in new assembly lines. But it faces no such reluctance in China, where the company is spending aggressively to build several new factories.

Ford has already announced about $5 billion in investments in China, and is planning to increase its local production capacity to 1.2 million vehicles a year, nearly double its current rate. Ford is looking to its strong lineup of SUVs to help drive big sales increases. SUVs are one of the hottest segments in China at the moment, and Ford expects its new Escape (called Kuga in overseas markets) and well-regarded Explorer to be as competitive in China as they have been elsewhere.

A boost from competitors' struggles
Ford has also been helped by the struggles of some key rivals in recent weeks. Toyota (NYSE: TM  ) , Honda (NYSE: HMC  ) , and Nissan (NASDAQOTH: NSANY  ) all have seen sales fall dramatically as a dispute between China and Japan over a series of islands has led to an outbreak of anti-Japanese sentiment. Toyota's sales in September were down 49% over year-ago levels, and it appears that Ford and its German and Korean rivals were the key beneficiaries.

This all bodes well for the success of the Blue Oval's aggressive China expansion. While Ford was late to the Chinese auto party, and missed out on much of the dramatic growth seen last decade, it's increasingly clear that Ford's great product story – top-notch vehicles, well-equipped, at reasonable prices – is proving to be as compelling to Chinese consumers as it has to buyers elsewhere.

Fool contributor John Rosevear owns shares of Ford and General Motors. Follow him on Twitter at @jrosevear. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of General Motors and Ford and creating a synthetic long position in Ford. We Fools don't 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. The Motley Fool has a disclosure policy.


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Comments from our Foolish Readers

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  • Report this Comment On October 15, 2012, at 4:18 PM, Velek wrote:

    While I'm happy that Ford is gaining traction in China, I kind of don't like the "Great Leap Forward" reference. Mao's rule was a time of tremendous destruction in that country's history.

  • Report this Comment On October 15, 2012, at 4:42 PM, TMFMarlowe wrote:

    @Velek: Fair point. I don't like it much either. Probably too late to change it, but I'll ask.

    Thanks for reading.

    John Rosevear

  • Report this Comment On October 16, 2012, at 12:00 PM, mountain8 wrote:

    Dear Velek,

    If that's all you got out of the article, you missed the point.

    "Great Leap Forward" is only three little words that are very accurate as used in this article if the facts are accurate. You might remember Lincoln said a bunch of catchy little things even though his rule was a time of tremendous destruction in our countries history. Sorry your "political correctness" has gotten in the way of your intelligence. Only in America.

    When said by a pompous, ruthless, tyranical, megalomaniac and followed by gunfire and massacre, it's an excuse to oppress.

    It's just a writing technique here, as you know, Marl. And kinda neat in a ironical way, as I figure you intended. (I'm guessing you changed it to "big". It was a little tacky). Could be compared to something like, "Read My Lips!" How overused, is that. And by thousands who don't even know who said it, what happened, and what it cost him.

    I liked the article either way.

  • Report this Comment On October 16, 2012, at 12:07 PM, kthor wrote:

    hmmm Ford should have a cheezy ads in china something like " Ford Supports China;s Claim of that Island" see how much ford sales goes up in china ...lol

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