Ford Is Racing Ahead of Peers and Investors Should Hold on

Ford (NYSE: F  ) has been an exceptional performer in the automotive industry. It was among those few players who managed to cruise through the tough recessionary period relatively better, while its peers, such as General Motors (NYSE: GM  ) , went under.

Stock price performance
Ford has been performing well as compared to its industry peers. Ford's stock price performance in the last five years has been way better than its peers as depicted by the chart below:

F Chart

F data by YCharts

Clearly, Ford has provided the highest return to its investors with a 277.8% increase in its stock price. This is much ahead of Toyota Motor (NYSE: TM  ) and Honda Motor which gave a 51.8% and 29.1% return, respectively. One of the key reasons for Ford's better performance compared to its Japanese competitors was the dispute between China and Japan which led to a shift in demand for non-Japanese cars in China. Moreover, Ford's product innovation increased demand for its products. Its new launches such as Fusion and EcoSport is attracting a lot of customer attention.

Ford's Fusion is a hit and has become very popular among customers. August sales for the vehicle grew 13.4% and the car has been selling for 20 days in the market. This is much faster than the industry average. Even EcoSport has become very popular among customers, helping revenue from China to grow remarkably.

The Chinese market
China is the largest market for the automobile industry and the dispute between Japan and China created great opportunity for the non-Japanese car manufacturers. Hence, General Motors and Ford had a great year in China with increasing market share. In fact, General Motors has already sold 2 million units since the beginning of the year with 245,799 units in August itself. Even Ford witnessed a 46% increase in the number of vehicles sold in the month of August.

In fact, losses from Europe have been offset by the growing sales in China for both General Motors and Ford. In its recent quarter, General Motors reported a decline of 6.8% in revenue from Europe. However, the European market has been recovering as showcased by narrowing losses for General Motors.

On the other hand, Japanese automakers such as Toyota are experiencing decline in sales in China. In fact, the carmaker has not only witnessed a drop in market share in China, but also in the U.S. Its market share in the U.S. has dropped to 14.4% from 17% in 2009. Hence, it has been launching new cars such as a hydrogen fuel cell car and the new 420-horsepower Yaris hybrid. It also plans to raise its product prices in India.

Surprisingly, Toyota has been witnessing an increase in demand for its RAV4 model in Europe. The number of vehicles sold in the region increased 43% to 27,000 units for the first eight months of 2013. Hence, the company plans to expand its operations in Europe and has invested $181 million in Russia. This might help Toyota to make up for the sales lost in China.

The takeaway
Ford has been a remarkable performer with great products. Moreover, it has been backing its products with great marketing techniques. It has recently sponsored a reality show so that it
can sell its 2014 Fiesta subcompact. The reality competition show winner will be given a Ford Fiesta, promoting the company.

Also, Ford recently announced its plans to introduce electric-vehicle charging stations at its offices and plants. This will benefit employees at Ford by getting their cars charged when they are at work. The facility will be provided for free for the first four hours, enabling employees to save around $2 per day. This is a good move considering the growing sales of electric vehicles in the U.S.

Overall, Ford has been doing well as well as providing great returns to its investors. Its new product launches and focus on the Chinese market make its future prospects bright. Moreover, the U.S. automobile industry has been growing considerably. Deliveries of new automobiles are expected to rise to 16.1 million by next year. Hence, Ford's future looks bright.

The Future of Ford
Do you know the major developments that could crush Ford? The secrets to success that could make investors like you rich? The answers are simpler than you think, and The Motley Fool is sharing them in a free report entitled, "5 Secrets to Ford's Future." Inside we outline critical information every Ford investor must know, so click here now for your free report.


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.

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: 2671208, ~/Articles/ArticleHandler.aspx, 9/18/2014 4:07:31 PM

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