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Ford Motor Company Hit a Speed Bump in China: What Investors Need to Know

Ford's Fiesta during its World Tour. Source: Ford Motor Company

Ford Motor Company (NYSE: F  ) posted its automotive sales in China this morning, and it was a very slow month for America's second-largest automaker. Ford posted a meager 17% gain in Chinese sales last month, compared to last year's June; its slowest monthly sales increase this year by 11 percentage points.

Of course, that statement is said mostly in jest. Ford's 17% sales gain is obviously a very significant increase. It just goes to show you how excellent the first five months of 2014 have been for the folks at the Blue Oval in the world's largest automotive market.

Here are the details and what investors can expect going forward.

By the numbers
Last year, Ford posted a record sales year in China -- the automaker dramatically increased its 2013 full-year sales figure by nearly 50% compared to 2012. This year, however, will almost certainly be a milestone for Ford as its full-year sales in China are on pace to break 1 million for the first time. 

Ford's sales in China are up 35% to nearly 550,000 wholesale vehicles through the first half of this year, compared to the same time frame last year.

Graph by author. Source: Ford Motor Company.

Much of Ford's recent success in China has been driven by increased demand for the Focus, Kuga (Escape), Mondeo (Fusion), and the EcoSport. Despite already being Ford's best-selling nameplate in China, and thus working from a large sales basis, its sales were still up nearly 9% through June, compared to last year. In fact, the 201,464 Focus units sold through June account for more than one-third of Ford's total sales in China.

While the Focus certainly leads the charge in China, Ford's newer models continue to gain sales traction. Through the first half of the year, Ford sold nearly 60,000 Mondeo (Fusion) vehicles, which was a 124% increase compared to the first half of 2013. The Mondeo could easily set a new annual record for sales in China as its sales continue to grow; its June sales were 168% higher compared to a year ago.

Ford's Kuga (Escape) in Beijing's auto show. Source: Ford Motor Company

Just as Ford's Fusion and Escape are a one-two punch in the United States, the Mondeo and Kuga do a similar dance in China. Along with the huge leap in Mondeo sales, sales of the Kuga in China rose 78% to more than 66,000 vehicles sold during the first half of 2014, compared to last year.

While Ford's EcoSport trails  both the Mondeo and Kuga in total sales volume, its sales also more than doubled from last year to more than 33,000 vehicles sold in China through June.

"Ford's strong sales in the first half demonstrate the success of our accelerated China growth plan," said John Lawler, chairman and CEO of Ford China, in a press release. "We continue to grow our sales network, increase capacity and hire great employees -- all to deliver the high quality, safety, fuel efficiency and smart technologies that Chinese customers demand."

Bottom line
One of former Ford CEO Alan Mulally's last tasks before retiring was to visit China for the opening of the Shanghai Jiuhua West Dealership on June 19. On that day, Ford opened the doors of 88 new dealerships in China, which boosted its number of outlets in the region by roughly 13%, and brought its total dealership count to 750. That shows Ford's management team is very confident that sales in China will continue to improve at a breakneck pace. 

Don't expect to see very many "slow" sales months, such as June's 17% year-over-year increase, in the months and years ahead. Ford is accelerating its sales rapidly in the world's largest automotive market and that doesn't look to be changing anytime soon -- that's great news for the automaker and its investors.

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Daniel Miller

As a Motley Fool Industrial Specialist, I use my marketing and business background in the automotive industry to evaluate major automakers and other large industrial corporations. Follow me on twitter for tweets about stocks, cars, sports, and anything I find amusing.

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