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It's no secret that Ford (NYSE: F ) is looking to overseas markets to drive growth in coming years.
While the Blue Oval has done well in the U.S. market, generating great margins with strong products, it clearly needs to look beyond North America (and Europe) in order to grow.
In the last few years, the company has been doing just that: Doubling down on China, ramping up in South America, and looking to new markets like Russia, where Ford's Focus has recently become a best-seller.
Ford has also worked to expand its presence in India, where a growing middle class is expected to lead to a big increase in demand for new cars in coming years. But lately, Ford's market share in the giant country has been going the wrong way.
Poor dealers, expensive products keep Ford behind
By the end of the decade, India is expected to pass Japan and become the world's third-largest automotive market, after China and the U.S. Ford would obviously like a big piece of that rapidly growing pie – but lately, it has been losing ground.
Through October, Ford's sales in India are down 8.4% -- despite an 11% year-to-date gain in the overall market -- thanks to increased competition and what some analysts say is a failure to understand the needs of Indian customers. Ford's market share in India is currently just 3.2%.
Part of the problem is Ford's dealers. In a recent J.D. Power report that ranked India's auto dealer networks for customer service, Ford's were near the bottom. Ford is hoping to double the size of its Indian dealer network by 2015.
But part of the problem is also Ford itself, and that will make recruiting better dealers a challenge. On the one hand, its Figo subcompact – an inexpensive car derived from the last-generation European Ford Fiesta, which dates to 2002 – has done pretty well in India, outselling any of General Motors (NYSE: GM ) current offerings in the country.
But some of its other vehicles (like the current-generation Fiesta) are just too pricey for a market where companies like Hyundai (NASDAQOTH: HYMTF ) , Tata Motors (NYSE: TTM ) , and market leader Maruti Suzuki (NSI: MARUTI.NS) dominate with small, simple cars and trucks.
GM may be better-positioned to step up now
GM has had an even harder time in India – its sales this year are down 17% through October – but GM is looking to draw on its Chinese market product line to help get things going in the right direction.
According to a Bloomberg report, GM just began taking orders in India for the Chevrolet Sail. The Sail is a small, inexpensive car developed by GM specifically for the Chinese market, where it has been a consistent top seller. GM is also planning to introduce to India a Chevy-branded version of the inexpensive Wuling minivans that account for about half of GM's sales volume in China.
GM is looking to those vehicles to help boost its share of the Indian market to 10% within five years. But aside from the Figo, and products like the last-generation Focus which it sells as an entry-level car in China, Ford doesn't really have an appropriate lineup of inexpensive vehicles to tap for emerging markets.
As the market evolves, Ford's position could improve
It may be that Ford will have better luck as Indian incomes rise. Ford was a relatively late entrant in the Chinese market, which cost it some ground – but which also meant that it could position its global products as relatively premium offerings, a strategy that has led to big success for Ford's Focus.
Likewise, as more Indians have more money to spend on cars, Ford could find itself doing quite well with its global Fiesta and Focus, as well as its small SUVs. But there's a chicken-and-egg problem there: Ford will need some level of name recognition in the market to draw those customers into its dealerships – and the dealers will have to be prepared to treat those customers well.
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. But Ford's stock seems stuck in neutral. 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.