When Ford (NYSE:F) announced its aggressive expansion plan for China a few years ago, analysts didn't know what to think. On the one hand, experience had shown that it was unwise to doubt CEO Alan Mulally and his team. On the other hand, Ford was very late to the Chinese auto party, and its goals seemed awfully ambitious.
Fast forward a few years and, if anything, it's looking like Ford's goals were way too conservative. It turns out that Chinese consumers love Ford's premium but still mainstream global offerings. They've made the Focus one of China's best-selling cars, and now the Mondeo (the Chinese version of the Fusion), and the Kuga (China's version of the Escape), are posting strong sales, as well.
As Fool contributor John Rosevear explains in this video, Ford's sales are still growing at a rate much faster than the overall Chinese market. Ford blew past Toyota (NYSE:TM) in monthly sales late last year and, as John explains, it's now gaining rapidly on some much larger rivals.
A transcript of the video is below.
John Rosevear: Hey Fools, it's John Rosevear, senior auto analyst for fool dot com. Ford said this past week that it had yet another huge month in China in March. Sales were up 28% last month, with Ford breaking the 100,000 sales per month mark for the first time ever in China. That was way ahead of the overall growth in China's new-vehicle market in March, which was up 9%, so Ford continues to gain market share. And that gain capped a first quarter that saw Ford boost its sales by 45% in China.
The momentum that Ford has in China is really incredible right now. We saw a few months ago that they blew past Toyota in terms of sales in China, and now Ford is close behind Nissan and Hyundai. Their first-quarter sales were just 1% behind Hyundai and 4% behind Nissan, and Ford's rate of growth is way outpacing both Hyundai and Nissan.
In fact, it's pretty remarkable. Ford got a very late start in China and, for a long time, their efforts were absolutely dwarfed by the two big players, Volkswagen and General Motors (NYSE:GM); but it's looking very possible that Ford could be the third-largest selling automaker in China before long, which would just be a tremendous thing for them.
So how are they doing this?
Well, over the last several years, we've seen Ford go to this global lineup of vehicles that are kind of positioned at the premium end of the mainstream auto categories. The Focus is a nice compact car; the Fusion is a nice midsize car. They might cost a little more than what Toyota or Hyundai is offering, but they come with more features, and they feel a little more solid.
This has worked out really well for Ford in terms of profits in the U.S., and it's a formula that turns out to be playing really well with consumers in China. Many middle-class Chinese say they want a nice car that isn't ostentatious, that isn't a flashy luxury brand, but that still has some luxury features and maybe a luxury-car type ride, and Ford really kind of owns that right now.
The Focus has just had a tremendous run in China. It's one of China's best-selling cars every month and, more recently, we've seen strong sales for the Kuga, which is the Chinese version of the Ford Escape SUV, and for the Mondeo, which is the Chinese version of the Fusion.
If you're watching this on Fool.com you can see a picture of the Kuga above this video. That's from Ford's China marketing materials, but you can see clearly that it looks just like the Escape. It's the same vehicle with some minor changes for the Chinese market. Ford said it sold over 12,000 Kugas in China last month and has now sold over 100,000 since it was introduced in March of 2013.
So, long story short, Ford's growth story in China continues to look great, ahead of expectations, and some significant milestones are now within reach for them. Thanks for watching.
John Rosevear owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.