These 2 Automakers Are Poised for Success in China

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Overall, it's been a good year for automotive manufacturers. Pent-up demand from the recession is boosting numbers in the U.S. with sales leaders GM (NYSE: GM  ) and Ford (NYSE: F  ) posting increases of 4% and 5%, respectively, but lagging far behind Chrysler's 21% improvement for the year. It was a comeback year for Japanese automakers Toyota (NYSE: TM  ) and Honda (NYSE: HMC  ) , who battled through the supply disruption from the tsunami aftermath and posted yearly gains of 27% and 24%, respectively. With U.S. sales numbers like that, it's not surprising that all four companies outperformed the market in 2012. U.S. sales are extremely important to the success of these companies, but equally important is how they perform overseas. Let's take a look at how sales wrapped up for December, as well as the full year, in China and see which companies are poised to outperform the market for a second straight year.

China backlash
Japanese automakers struggled to sell vehicles in China during the second half of 2012. A territorial dispute between Beijing and Tokyo, regarding a set of islands, caused a harsh backlash against Japanese businesses. For Honda, the decline started in October; sales in China were down 54% versus the prior year, followed by a decline of 29% and 19.2% for November and December, respectively. Toyota's sales sing the same sad song, with declines starting at 50% in September followed by 44% in October and and 22% in November. Following those drastic declines, December numbers still were down 16%. In my opinion we can expect these declines, albeit to a smaller degree, to continue giving investors cause for concern for another quarter. 

In September 2012, Moody's projected China's light-vehicle demand to grow 8.5%, which was below its previous forecast of 10%. Honda and Toyota experienced drastic declines, yet overall expectations are for growth in China, so who took advantage? Much to the delight of GM and Ford investors, they have stepped in to lay claim to the gains. I'll focus on Ford now, and in a later article I'll investigate GM's full December results, once they have been released. 

Why Ford is succeeding in China
Ford put up a company record for annual sales in 2012, up 21% versus 2011. December was even brighter, with a 43% gain from the prior year, and its the fourth-consecutive month to set a vehicle sales record. I can't say it better than John Lawler, chairman and CEO of Ford Motor China:

Record 2012 sales highlight the positive response our customers have for our full portfolio of high-quality, safe, fuel-efficient and smart vehicles ... Their enthusiasm for Ford cars validates our aggressive plan to introduce 15 new vehicles, double production capacity, and double our China dealership network—all by 2015.

Ford set records for annual passenger car sales, including its Edge, with sales up 31% to 426,608 wholesale cars sold. In December alone, an increase of 59% versus the prior year sales was reported. The Ford Focus is also driving sales figures, accounting for 296,360 wholesale units sold in 2012. 

Joint ventures
Ford's joint ventures are also performing very well and increasing its sales momentum. Its passenger car joint venture Changan Ford Automobile (CAF) broke records with a 60% increase in December alone, and a drastic annual increase of 31%. Ford's other joint venture, Jiangling Motors Corporation also posted a healthy December growth of 14% versus the prior year, and finished 2012 up 3%. While that pales in comparison to the success of CAF, it's still progress in a market in which Ford must capture growth in order to catch dominate rival GM and beat the market in 2013.

Bottom line
With U.S. vehicle sales rebounding from the recession, for these companies to beat the market again in 2012 they will need to capture growth in China. One reason the spotlight is on China, is because Europe expectations for vehicle sales are dismal. I believe GM and Ford are both poised to take advantage of China's growth with the introduction of new vehicles, and joint ventures gaining momentum. During the backlash on Japanese businesses since September, GM and Ford's stock prices have increased 35% and 37%, respectively. Both companies now have a stronger foothold in China, and that should result in great returns for investors. For that reason, I believe that Ford and GM represent the best chance, of companies mentioned, to beat the market again in 2013.

What's inside Supernova?
Ford has been a longtime selection of Motley Fool co-founder David Gardner, helping lead his stock picks to gains of more than 113% in our Stock Advisor service since it launched in 2002. Those returns have beaten the market by more than 87%. David has managed to trounce the market by always being on the lookout for revolutionary stocks and recommending them before Wall Street catches on to their disruptive potential. If you're interested in how David discovers his winners, click here to get instant access to a personal tour behind David's Supernova service.

Read/Post Comments (0) | Recommend This Article (2)

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.

Compare Brokers

Fool Disclosure

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: 2199881, ~/Articles/ArticleHandler.aspx, 9/27/2016 8:47:12 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...

Today's Market

updated 11 hours ago Sponsored by:
DOW 18,094.83 -166.62 0.00%
S&P 500 2,146.10 -18.59 0.00%
NASD 5,257.49 -48.26 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/26/2016 4:00 PM
F $12.01 Down -0.16 +0.00%
Ford CAPS Rating: ****
GM $31.80 Down -0.32 +0.00%
General Motors CAPS Rating: ***
HMC $29.03 Down -0.46 +0.00%
Honda Motor CAPS Rating: ****
TM $117.10 Down -0.56 +0.00%
Toyota Motor CAPS Rating: ***