Ford Motor Company (NYSE:F) said that its sales in China fell 32% in January, in part because of a change in tax incentives for car-buyers -- and in part because of a quirk in the Chinese business calendar.
Ford's China sales: The raw numbers
Ford has two joint ventures with local Chinese automakers. Changan Ford, or CAF, builds and sells a range of Ford cars and SUVs drawn largely from Ford's global product portfolio. The other joint venture, called Jiangling Motors Corporation (JMC), builds Ford's Transit vans, the midsize Ranger pickup, and a Ranger-based SUV called the Everest.
Ford's sales in China also include some vehicles imported from elsewhere, including the United States. Those include the Mustang, the Explorer, and high-performance versions of the Fiesta and Focus, among others.
All numbers shown in the chart are retail sales, not wholesale shipments to dealers. Sales of Lincoln-brand vehicles are reported quarterly and are not included in this chart.
|Metric||January 2017||January 2016||Change|
|Imported Ford vehicles||2,020||1,721||17%|
|Total for China||88,432||130,832||32%|
About that calendar quirk
In China, businesses typically close for several days around the annual New Year's holiday. Naturally, sales of cars (and other things) fall dramatically during that period. But Chinese New Year is a lunar holiday, meaning its calendar date isn't consistent: Sometimes it falls in late January, and sometimes in early February.
Last year, Chinese New Year fell on February 8, meaning those lost sales happened in February. But this year's celebration was on January 28, meaning that in China, January of 2017 had five fewer "selling days" than did January of 2016.
The upshot is a very unfavorable year-over-year comparison for January. But on the bright side, next month's results should look pretty good.
(Note that the January comparison went the other way last year.)
How a change in tax incentives also dented sales
The calendar quirk wasn't the only factor that dented year-over-year sales for Ford and its rivals. The Chinese government offers a tax incentive to buyers of vehicles with smaller engines (smaller engines use less fuel and produce less pollution, generally speaking). That incentive was cut in half as of January 1.
The cut was announced ahead of time, leading many buyers to rush to buy new vehicles in December so as to get the full tax break. The effect was that sales that might normally have happened in January were "pulled ahead" to December.
Note that Ford's rivals were also affected by both of these factors. General Motors' (NYSE:GM) sales in China fell 24% in January.
Other than that, how was the month?
There were some bright spots for Ford in China in January. Here's what Ford's China sales chief, Peter Fleet, had to say:
Sales of vehicles not affected by the tax incentive were strong. In fact, the Edge, Explorer and Mustang all saw an increase over a year ago despite the fewer selling days. So the underlying market conditions and customer demand for our exciting new products remains strong.
Note that both the Explorer and Mustang are imported to China from the United States. Because of China's tariffs on imported vehicles, prices are high, and the total sales numbers for both models are fairly small. But the Edge is built in China, its sales numbers are significant, and it clearly had a very good month in January.
It's also worth noting that sales at JMC were up 17.4%, suggesting that sales of Ford's Transit commercial-van lineup continue to be very strong in China.
Long story short: Ford's most profitable products seem to be doing well in China as 2017 opens, but it's too early to get a clear view of the overall picture.
The timing of the New Year's holiday makes it a little difficult to get a clear read on how Ford (and its rivals) are doing in China right now. We'll have a better understanding of how Ford is doing in China when we can compare combined numbers for January and February to year-ago results.