It's the world's largest auto market, and in recent years it has grown at a spectacular rate. It's a market dominated by familiar brands like Chevrolet and Volkswagen, as well as brands and badges most Americans wouldn't recognize.
It's China, and it's a party that Ford
It's the General's party now
Say what you want about the ineptitude of General Motors
Likewise, China's other foreign juggernaut, Volkswagen. Working through several joint ventures, VW has made big inroads in all segments of the market, including the (very profitable, and booming) high end: Two of the top three selling luxury cars in China are Audis, and Volkswagen is China's top-selling car brand.
Ford's starting from behind
Other familiar brands, later to the party, are also finding new fans in China. Honda
But where's Ford? Way down the list, as it turns out. The Blue Oval brand trails all of the above names and several less familiar ones, including deeply troubled Berkshire Hathaway
Getting outsold by Chevrolet or VW would be one thing. But by Buick? That has to hurt.
Can Ford claim a bigger piece of the pie?
It's fair to say that CEO Alan Mulally has had higher priorities than China since arriving at Ford, with tasks such as saving the company from total collapse and driving a major product renaissance a bit higher on his to-do list. But Ford's China effort is finally picking up steam, with the company saying that it intends to add 15 new products and double its Chinese workforce by 2015.
But there's a problem: China's auto sales growth is slowing. After a 48% increase in sales in 2009 and another 33% surge in 2010, analysts are expecting more moderate growth rates going forward. Year-over-year growth in the 5% to 15% range will still offer plenty of opportunities, but the days of explosive growth, when Ford could have made big inroads (and big profits), may be history.
Ford executives say there's still plenty of opportunity, and they may have a point. Three-quarters of auto purchases in China are still being made by first-time buyers, meaning that a new-to-market brand can still grow quickly, at least in theory. And Ford already has 340 dealerships in China, another number it hopes to double by 2015, as well as a strong global brand.
Long story short, to date, Ford has mostly missed out on the explosive growth of China's auto market. But Ford expects 70% of its growth over the next decade to come from emerging markets, and much of that will be from China. Will Ford be able to break out of its niche and become a major player in China even as the market cools off? I wouldn't bet against Mulally and Ford right now, but becoming a big player in China will be a big challenge.
Fool contributor John Rosevear owns shares of Ford and General Motors. Berkshire Hathaway and General Motors are Motley Fool Inside Value choices. Berkshire Hathaway and Ford are Motley Fool Stock Advisor selections. BYD is a Motley Fool Rule Breakers recommendation. The Fool owns shares of Berkshire Hathaway and Ford.
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