Ford Is Set to Win Big in China


Ford's Joe Hinrichs presented the EcoSport SUV at last year's Auto China show. The EcoSport, one of several Ford SUVs set to debut in China, will arrive at Ford's Chinese dealers later this spring. Photo credit: Ford Motor Company

Analysts were surprised a few years back when the scale of Ford's (NYSE: F  ) ambitious plans for China first became clear.

For a while, the Blue Oval's plans to spend almost $5 billion on new factories and roll out 15 new models by 2015 seemed... not far-fetched, exactly, but more than ambitious. Audacious, maybe.

Preoccupied with its problems at home, the Blue Oval had stood by while global archrivals General Motors (NYSE: GM  ) and Volkswagen (NASDAQOTH: VLKAY  ) carved out commanding positions in the Chinese market over the last decade, with Toyota (NYSE: TM  ) not far behind.

There was a sense that Ford was scrambling, hoping not to be completely left out.

But here it is just a couple of years later, and Ford has already blown by Toyota in China.

Now, Ford executives are saying that they're going to raise the bar even higher.

Can Ford really double its market share in three years?
Ford's Asia chief, Dave Schott, told reporters in Shanghai on Monday that he believes that Ford can get to 6% of the Chinese passenger vehicle market over the next three years.

In 2012 – a year that saw big growth for Ford in China – the company's share of the market was 3%. For perspective, that's just a little bit bigger than Subaru's market share (2.5%) in the U.S. In other words, Ford is known in China, but not exactly huge, at least not yet.

But Schott says the future is bright. 2013 in particular will be a "turbocharged year", he said on Monday.

So can the Blue Oval really double its share of the market in China over the next three years?

Frankly, I won't be surprised if they do that and more. Here's why.

Chinese customers like the new Fords quite a bit, it turns out
Ford's China sales were up big for much of last year, and the main of those sales gains was the Focus. Ford sells two versions of the Focus in China: the old European model, which is called "Classic Focus" and sold as an entry-level car, and the current-generation car as sold here, called "New Focus" and positioned as more of a premium model.

The New Focus started arriving at Chinese dealers last spring, and that's when Ford's sales really started to take off. It's clear that Chinese consumers like Ford's current direction – sharp styling, premium interiors, and high-tech features – quite a bit.

Last quarter, the small SUV that we know as the Escape arrived in China. Called the Kuga there (as it is in Europe), it impressed local reviewers and sold quite well in March, its first full month on sale.

Next up, later this spring, is the all-new Ford Mondeo. That's the same car we call the new Fusion, as in "Ford's hot new Fusion is tearing up the U.S. sales charts." Already, there's considerable buzz about this new model in the Chinese auto media, for the same reason there was a lot of buzz about it here ahead of its debut last fall: It's a great-looking sedan that's loaded with high-tech features.

Ford will offer the new Chinese Mondeo with its latest EcoBoost engine, a 1.5-liter version that will deliver good power and fuel economy while allowing customers buying the Mondeo to qualify for a tax break.

It's hard to predict which cars will be hits before they're launched, but this one looks like a good bet to do very well in China.

There's a lot more on the way
SUVs are the hot market segment in China right now, and not too many automakers can challenge Ford on that front. The Kuga was just the first of three SUVs that Ford will roll out in China by summer. Next up are the EcoSport, a small SUV that sells well in South America, and the made-in-Chicago Ford Explorer. (Yes, Ford exports SUVs from the U.S. to China. How about that?)

Beyond that, Ford is laying the groundwork for even greater expansion. The company has already doubled its Chinese dealership total, adding dealers in inland areas where many families are just now looking to buy their first new car or SUV.

Having the first new-car dealership in town was a good expansion strategy for Ford here in the U.S. a century ago. It's likely to work out quite well in China as well.

How well? Ford said this week that 40% of the company's global sales could come from China by 2020. If that pans out, Ford will be selling more vehicles in China than in the U.S. – and that is likely to be a very profitable situation for the Blue Oval.

Is it too late to buy Ford stock?
If you're concerned that Ford's turnaround has run its course, relax -- there's good reason to think that the Blue Oval still has big growth opportunities ahead. We've outlined those opportunities in detail, in the Fool's premium Ford research service. If you're looking for some freshly updated guidance to Ford's prospects in coming years, you've come to the right place -- click here to get started now.


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  • Report this Comment On April 16, 2013, at 9:10 PM, Jeffkory wrote:

    I have noticed that in the last 5 years people seem to be getting tired of bieng duped by toyota. I'm glad to see a american company dooing so well. Toyota didn't do anything that ford hasn't pulled in the past { I worked 16 years for ford as a mechanic } Ford stepped up their game and are building better products in the plants- Not turning them over to the public with known issues that may or may not make warrenty. Toyota is still turning out vehicles with known issues-- It's their loss..

  • Report this Comment On April 16, 2013, at 9:55 PM, jpmj wrote:

    .Go F! Their management is the key and let's me always sleep well. They kept the company going and did not need any government bail out. All the while continued to build car that their customer could depend on. They did not panic, as I recall, over their short falls aboard. Also, I knew or hope, this same management team had something up their sleeve and not sleep walking like some investors / competitors would has you believe. Now, wow , the tables are turning and F's game plans looks very good for the future. Thanks for the article, John and to MF for keeping all of us on the cutting edge with your great research service. I for one will remain long because of MF's recommendation, $7. and some change. Go F/ MF!!!! jpmp4847

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