Ford Motor Company Is Crushing General Motors in This Vital Emerging Market

Most investors overlook the Indian automotive market's potential, but Ford is making it a key part of its global strategy.

Jun 5, 2014 at 7:00PM

Ecosport
Ford's EcoSport has found much success in India. Source: Ford Motor Company.

One mistake Ford Motor Company (NYSE:F) doesn't want to repeat is its late entry into a potentially important market. For example, Ford entered China -- now the world's largest automotive market -- years behind crosstown rival General Motors (NYSE:GM), and now the latter enjoys a roughly 10% market share lead in China over Ford.

Determined for that result not to become a trend, Ford is crushing General Motors in perhaps what may be the next big auto market: India. Here's a look at Ford's recent sales results in the country, and at why India could be such a big deal for automakers going forward, especially Ford.

By the numbers
Let's get the official sales figures out of the way and get to the real story. Ford India recorded a 51% improvement in May domestic wholesales compared to last year, reaching 6,053 vehicles. Ford India's export sales topped its domestic sales and crushed last year's export figure (1,991 units) when it posted exports of 6,235 vehicles in May.

Combining domestic and export sales, Ford India sold more than 12,200 vehicles last month -- a 105% increase compared to last May. Those figures from Ford crushed its crosstown rival's results. General Motors India sold 4,865 vehicles in May compared to the 8,500 units it sold in the same month last year.

To be fair, sales at this level aren't going to move the revenue needle for America's two largest automakers when both post sales that often exceed 200,000 units -- sometimes by a wide margin -- in the U.S. alone every single month. With that said, India might be closer to moving the needle for automakers' revenue than investors think.

In fact, according to IHS Automotive, a global market information provider, it expects India to become the world's third-largest automotive market as soon as 2016, behind only China and the U.S. markets. It should be noted that those rankings are for countries only, not collective entities with combined sales, such as the European region. IHS predicts that India's automotive market will jump ahead of the markets in Japan, Germany, and Brazil.

More to the story
Perhaps even more important than India's potential for a huge growth in sales is the role it will play in Ford's global strategy. Ford is currently undergoing its biggest industrial expansion in five decades in its Asia Pacific region, and the company's focus on a global platform of vehicles that can sell anywhere makes India a focal point for exports.

"Despite current macroeconomic factors and ongoing market challenges, India is a big part of our global strategy. Exports from India have always been an integral part of that strategy and will help us to stay on track for turbocharged growth in the region, while going further to provide our customers with the vehicles that they want and value." said Dave Schoch, Ford group vice president and president of Asia Pacific, in a Ford press release.

To help add context to why Ford India's exports will be a big deal is the fact that Ford expects that by the end of this decade demand for small vehicles will account for more than 60% of the global vehicle market; more than half of that global volume will be found in the Asia Pacific region and Africa. That's where Ford India's exports will increasingly find their home.

That regional growth, in combination with Ford's prediction that India's own demand will double for B-segment (subcompact) vehicles and triple for sport utility vehicles between 2012 and 2017, makes Ford's growing presence in India very important for its global growth going forward.

Bottom line
Currently, India won't be moving the needle for Ford on quarterly conference calls, but that could change by the end of the decade. Long-term investors should keep an eye on these emerging markets closely and remain optimistic that Ford isn't lagging behind competitors when entering potentially vital countries, as it did in China. 

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Daniel Miller 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.

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