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Ford Focus Drives Revenues In China

By Daniel Miller - Apr 10, 2013 at 4:00PM

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After years of offering dismal products and vehicles that didn't sell well, it's great to see Ford top a million units sold of its Focus. Ford is proving it can now produce a quality, fuel-efficient vehicle that competes with its Japanese rivals.

There's been a lot of fuss between Ford (F -3.20%) and Toyota (TM -0.47%) this week. Mainly due to Ford's claim that the Focus is now the world's No. 1 selling "nameplate". I put that in quotations because – as you probably heard – it's a little misleading. Toyota is claiming its Corolla is actually the No. 1 selling vehicle – which is true. The Corolla sells under different names in different markets, so when you tally up all the numbers it does top the Focus. Either way, let the marketing goons battle that out: This is still great news for Ford investors, and here's why.

China boom
Ford was really late to get into the China market, but it has enjoyed a surge in sales this year and is hoping to keep the unexpected momentum going. The Focus topped 1 million unit sales because demand for the vehicle is rising in China. Overall, Ford and its joint ventures sold over 80,000 units in China for the month of March – 65% more than the previous year. That wasn't an anomaly; in fact, for the first quarter in China, it is 54% more than the same time period last year. The increase is faster than expected and by the end of the decade China is expected to bring in an estimated 40% of Ford's revenue.

Ford still trails its Detroit rival General Motors (GM -2.19%) in China by a long shot. But Ford is gaining ground, especially this year as the Japanese automakers lost sales and took a backlash over a territorial disagreement. Ford has plans to ramp up revenue in China with new models. It started recently by launching the Kuga – the Escape renamed – which has been well received. Over the next few months the Explorer and EcoSport will also be making their debuts. As soon as next year expect the Lincoln brand to take a stab at the luxury market. Ford CEO Alan Mulally claims that Ford is one of the fastest-growing brands in China, and as long as that holds true there is a bright future for Ford -- which is continuing to win over customers here in America.

Increased competition
It's common knowledge that China's growing middle class is becoming a ridiculously massive market. That's why Ford – even with recent success – will have its hands full with increased competition. Volkswagen, the world's third-largest carmaker, already has plans to add at least seven plants in China. That's in addition to the 12 it already has! Volkswagen had a record operating profit of $15 billion last year; its premium brands contributed more than half of that figure. One reason is because of the huge success that Audi is having in China. With its joint ventures it raked in about $4.8 billion from the region alone, and plans to almost double its production capacity by 2018.

Bottom line
Make no mistake, Ford is still an underdog in China right now. But I consider it my dark-horse to make a run and compete for the two top spots in sales. The only way to do it is to produce a quality vehicle that people want to buy. Easier said than done, as anyone who saw Detroit's vehicles a decade ago can attest. Things are different now that Ford has more than a handful of popular vehicles around the globe. Investors enjoy the ride -- with plenty of room for growth, it should be a good one.

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Stocks Mentioned

Ford Motor Company Stock Quote
Ford Motor Company
F
$12.42 (-3.20%) $0.41
Toyota Motor Corporation Stock Quote
Toyota Motor Corporation
TM
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General Motors Company Stock Quote
General Motors Company
GM
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