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Ford's Sales in China Rise 14% as Growth Streak Continues

By John Rosevear – Nov 7, 2016 at 1:05PM

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Strong sales gains helped Ford to a big increase in profits from China in the third quarter. Those gains continued in October.

Sales of the Ford Edge SUV in China nearly doubled in October, driving another strong month for Ford. Image source: Ford Motor Company.

Ford Motor Company (F 0.09%) said on Monday that its sales in China grew 13.6% in October, as the Blue Oval built on a strong third-quarter performance in the Middle Kingdom.

Ford's sales in China: The raw numbers

All numbers are retail sales. 

CategoryOctober 2016October 2015ChangeJanuary-October2016January-October 2015Change
CAF 82,368 74,820 10.1% 745,650 654,919 13.9%
JMC 23,949 18,632 28.5% 206,578 201,124 2.7%
Imported Ford vehicles 1,301 1,295 0.4% 13,953 22,794 (38.8)%
Total China sales 107,618 94,747 13.6% 966,181 878,837 9.9%

CAF = Changan Ford. JMC = Jiangling Motors Corp. Data source: Ford Motor Company.

A note about Ford's operation in China

Ford has two joint ventures with local Chinese automakers. Changan Ford, or CAF, builds and sells a range of Ford cars and SUVs, most of which are familiar models from Ford's global product portfolio. The other joint venture, Jiangling Motors Corporation, or JMC, builds Ford-brand commercial vehicles including Transit vans and the midsize Ranger pickup, as well as a Ranger-based SUV called the Everest. Ford's sales in China also include some vehicles imported from elsewhere. 

Note that the chart doesn't include Lincoln-brand sales. As of right now, all Lincolns sold in China are imported from the U.S., but they're not counted here, because Ford reports Lincoln's China sales quarterly. 

What's working (and isn't) for Ford in China right now

Ford's doing well in the sweet spots of the Chinese new-car market: crossover SUVs and small sedans. 

Ford offers the Edge in a locally built (by CAF) long-wheelbase seven-passenger version in China, alongside the familiar five-passenger version. Both are doing well: Sales were up 93% in October. Sales of the larger Explorer were up 30%.

Ford's compact Focus sedan is one of China's best-selling vehicles. Also among the country's best-sellers is a lower-cost compact sedan called the Escort, which was developed specifically for China. Sales were up 15% and 34% respectively in October.

The Ford Escort is a simple, affordable compact sedan developed specifically for the Chinese market. It has become one of the country's best-selling cars. Image source: Ford Motor Company.

As you can see from JMC's year-over-year sales gain, Ford is also doing well with its line of commercial vehicles. Ford's Transit line of commercial vans has been a big seller in both Europe and the United States; it's no surprise that it's doing well in China as well.

Ford also made a point of noting that Chinese sales of the Mustang were up 60% from a year ago. Total sales numbers are still small, but that's not really the point: The Mustang is a great brand-builder for Ford all over the world. 

Analysis: Ford is building on its third-quarter success

This is the fourth month in a row of strong year-over-year sales gains for Ford in China. That stretch follows a rough patch earlier this year, when Ford's team in China was caught somewhat off guard by aggressively priced competition from local Chinese automakers. That hurt Ford's sales of the compact Kuga SUV in particular. (The Kuga is the Chinese-market version of the Escape.) 

To its considerable credit, Ford's China team responded quickly, with cost cuts that enabled pricing adjustments without significantly denting profit margins. The result: Ford's equity income from its two Chinese joint ventures totaled $320 million in the third quarter, up 26% from a year ago, with a stout 13.4% margin. 

Ford CEO Mark Fields said last month that he expects that momentum to continue through the end of the year. Ford has begun rolling out revamped versions of the Kuga and the Mondeo sedan (twin to the U.S.-market Fusion); that should help keep China sales strong, Fields said. 

Ford's joint ventures generated $490 million in equity income in the fourth quarter of 2015. With one-third of the fourth quarter of 2016 in the books, it looks like Ford might be on track to beat that impressive number.

John Rosevear owns shares of Ford. The Motley Fool owns shares of and recommends Ford. 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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