Ford's sales in China made a huge rebound during the fourth-quarter and kept momentum last month. Image source: Ford Motor Company.

Ford Motor Company (F -1.92%) delivered an excellent fourth quarter that included a rare full-year profit in Europe, as well as the most profitable full-year result ever from its Asia-Pacific region, which is largely driven by China. Despite all the uncertainty about both China's overall economy and its automotive industry, Ford posted an impressive sales rebound in the quarter (which largely went unnoticed) and a record start to 2016.

Can't argue with facts
Yes, sales of new vehicles in China stalled over the summer, which led the government to cut its new vehicle purchase tax in half, in the hopes that it would stimulate the industry. And stimulate it did: Just look at the rebound in Ford's sales.


Chart by author. Information source: Ford Motor Company China press releases.

Not only was there a huge swing upwards that defied seasonal trends, but Ford's sales are even better than they appear in that graph. In May, Ford switched to reporting retail sales rather than wholesale sales, which will slightly lower the monthly reported figures.

That change to reporting retail figures rather than wholesale units didn't diminish Ford's impressive fourth quarter. In October, Ford China sold 95,185 vehicles, a 7% jump compared to the prior year. Year-over-year gains continued to climb when Ford reported 106,283 units sold in November, a 9% jump. Then the folks at the Blue Oval recorded a 27% increase in December sales, up to 124,768 units.

The good news for investors is that Ford's sales in the Asia-Pacific region are generating meaningful pre-tax income, which demonstrates how important China will be for the automaker in 2016 and beyond, because it's where pre-tax growth will come from over the next five to 10 years. 


Image source: Ford Motor Company's fourth-quarter presentation.

Fortunately, the company is starting off on the right foot in 2016. Ford China sold a record 130,832 vehicles in January, up 36% compared to the prior year. That favorable result was driven largely by record sales of the Ford Escort, the new Ford Mondeo (Fusion) and its entire SUV lineup. Ford's SUVs also posted a record-breaking month, with the Ecosport, Kuga (Escape), Edge, Explorer and Everest selling more than 37,000 units, a staggering 75% gain compared to the prior January.

"We are honored that customers are responding so positively to our vehicles," said John Lawler, chairman and CEO of Ford Motor China, in a press release. "The combination of great performance and great value is clearly bringing more people into Ford showrooms."

Ford wasn't the only Detroit automaker selling a plethora of vehicles in China last month. General Motors (GM 0.48%) posted a 7.3% year-over-year gain in January, to substantial total of 421,023 units sold -- likely reinforcing GM's position as the No. 1 foreign automaker rank in China. (We'll know for sure once Volkswagen Group (VWAGY 1.26%) reports sales figures.)

General Motors investors are typically more familiar with its sales in the U.S. market, and for good reason, as North America is responsible for the vast majority of the profits. However, GM actually sells more vehicles in China, and, unlike in America, the charge isn't being led by Chevrolet. Buick sales grew 39% in January to 138,907 units, compared to the prior year, and it marked the first time the brand has recorded 130,000 units sold in a single month.

A couple of other GM brand notes: Cadillac sales jumped 16% from a year earlier to more than 8,000 units, but Chevrolet struggled, posting a 27% decline to 56,133 units. The main question facing investors is: Can these sales figures continue? Or will the sales dry up as they did over last summer?

The road ahead
Despite the strong sales results in January, investors need to consider that operations in China are different than the U.S. market. For instance, the Lunar New Year holiday starts in early February, which analysts believe triggered strong car buying in January -- due to a stoppage in production and slowdown in economic activity. Typically, automotive industry analysts wait until February results are in the books before commenting on full-year projections and estimates. So, while January was an excellent start, investors should definitely take it with a grain of salt until January and February are balanced out.

On the bright side, China's purchase tax incentive will last through 2016, which should support sales for the rest of the year. Because of that, it should be another solid year for Detroit automakers in the world's largest automotive market.