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Ford's Great Drive in China

By John Rosevear – Oct 15, 2012 at 12:44PM

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As Japanese rivals struggle, Ford posts big sales gains in the Middle Kingdom.

It's true that the Chinese auto market has slowed dramatically, and the eye-popping double-digit gains of just a few years ago are starting to seem like ancient history.

It's also true that Ford (F 0.46%) was a very late entrant in the crowded, chaotic market, spotting a huge lead to giants like General Motors (GM 0.21%) and Volkswagen (VWAGY -0.32%).

And it's also true that even after big investments, Ford's market share in China still trails most of its big-name global rivals.

But here's another truth: Ford has made big gains in China lately.

Ford's focus in China
September was Ford's best-ever month in China, with almost 60,000 vehicles sold. While that's a modest total compared with Ford's sales in markets like the U.S., it represents a 35% increase over year-ago levels – even as Ford is still in the process of rolling out its full product line to Chinese consumers.

But there's little doubt that the Chinese like what they've seen so far from Ford, particularly in the compact segment. Over half of Ford's September sales – 33,587 units – wore the Focus nameplate. Ford sells two variants of its Focus in China: The last-generation car, called "Classic Focus," and the familiar current car, called "New Focus" and positioned as a premium offering.

Those two have combined to make "Ford Focus" the best-selling nameplate in China for the month, according to analyst Matt Gasnier of the Best Selling Cars Blog. It's also the No. 3 seller for the year to date through September – despite the fact that the New Focus was introduced in China in May.

The New Focus was the first of 15 new models that Ford plans to introduce to Chinese consumers over the next couple of years. Its success bodes well for the models still to come – and for Ford's huge investments in the country.

Big investments in future growth
Ford's U.S. sales have been flat in recent months; the company is bumping up against the edges of its current North American production capacity as it has been reluctant to invest heavily in new assembly lines. But it faces no such reluctance in China, where the company is spending aggressively to build several new factories.

Ford has already announced about $5 billion in investments in China, and is planning to increase its local production capacity to 1.2 million vehicles a year, nearly double its current rate. Ford is looking to its strong lineup of SUVs to help drive big sales increases. SUVs are one of the hottest segments in China at the moment, and Ford expects its new Escape (called Kuga in overseas markets) and well-regarded Explorer to be as competitive in China as they have been elsewhere.

A boost from competitors' struggles
Ford has also been helped by the struggles of some key rivals in recent weeks. Toyota (TM 0.74%), Honda (HMC 0.21%), and Nissan (NSANY -1.10%) all have seen sales fall dramatically as a dispute between China and Japan over a series of islands has led to an outbreak of anti-Japanese sentiment. Toyota's sales in September were down 49% over year-ago levels, and it appears that Ford and its German and Korean rivals were the key beneficiaries.

This all bodes well for the success of the Blue Oval's aggressive China expansion. While Ford was late to the Chinese auto party, and missed out on much of the dramatic growth seen last decade, it's increasingly clear that Ford's great product story – top-notch vehicles, well-equipped, at reasonable prices – is proving to be as compelling to Chinese consumers as it has to buyers elsewhere.

Fool contributor John Rosevear owns shares of Ford and General Motors. Follow him on Twitter at @jrosevear. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of General Motors and Ford and creating a synthetic long position in Ford. We Fools don't 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.

Stocks Mentioned

Ford Motor Stock Quote
Ford Motor
$13.18 (0.46%) $0.06
Toyota Motor Stock Quote
Toyota Motor
$143.34 (0.74%) $1.06
General Motors Stock Quote
General Motors
$38.28 (0.21%) $0.08
Honda Motor Stock Quote
Honda Motor
$23.94 (0.21%) $0.05
Volkswagen AG (ADR) Stock Quote
Volkswagen AG (ADR)
$18.60 (-0.32%) $0.06
Nissan Motor Stock Quote
Nissan Motor
$6.74 (-1.10%) $0.07

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