Ford's Focus continues to set company sales records in China. Source: Ford Motor Company

Ford Motor Company (NYSE:F) is locked up in a race to catch its competitors in the world's largest automotive market, China. Despite the fact that the folks at the Blue Oval are getting a late start, its gains in this rapidly expanding market have likely exceeded expectations. It can be easy to forget how much Ford still has to accomplish in China considering that its lowest monthly sales gain so far this year was a whopping 28% increase over the comparable time last year; at the high end of its monthly performances this year, staggering year-over-year gains of 53% and 67%, respectively, were posted in January and February.

Let's put these gains into context and explain what Ford investors should watch going forward.

Rewind the clock to 2012
A couple of years ago Ford recognized its dependence on North America for a large chunk of its revenues and a vast majority of profits could become a weakness. Quickly, America's second-largest automaker put its money where its mouth was and announced plans to invest roughly $5 billion on an expansion plan in China. The goal was to double its market share in China to 6% over the next three years through a string of vehicle launches.

In addition to Ford's highly popular small vehicles that dominate in China, the Focus and Fiesta, the company is now eyeing SUV and crossover segments that are catching on quickly there. Last April, Ford launched the EcoSport, Kuga, and Explorer models in China which have helped boost the company's sales to those new heights this year. At the same time Ford also launched the ST version of the Focus and the Mondeo (Fusion).

Graph by author. Source: Ford Motor Company sales releases.

As Ford continues to steadily roll out new vehicles, such as the upcoming Mustang and Escort, investors can expect the sales trend line in the graph above to continue upward into the distant future. In fact, at the end of 2013, Ford's sales had already surpassed those of both Toyota (NYSE:TM) and Honda (NYSE:HMC), to become the fifth-best-selling foreign automaker in China. Now Ford has its eyes set on Nissan and Hyundai and is rapidly gaining ground on those two in an attempt to become the third-best-selling foreign automaker in China, sooner rather than later.

Consider that through May this year Ford has increased its sales by 39% to 461,473 units compared to Nissans 15% increase to 507,700; meaning in just 12 months Ford's sales could top Nissan's. Ultimately, Ford remains on pace to become the third-largest foreign automaker in China, which is pretty impressive considering its late entry into the market compared to its competitors.

Challenges loom
However, Ford's accelerating sales pace doesn't tell the whole story and Ford still has a lot of work to do to catch crosstown rival General Motors (NYSE:GM) GM is competing with Volkswagen to retake the title of the best-selling foreign automaker in China; both have market share hovering between 14% and 15%. Despite Ford's impressive year-over-year gains it still trails General Motors by a large margin in overall sales.

Graph by author. Source: Company monthly sales releases.

If and when Ford becomes the third-best-selling foreign automaker in China, it will face an incredibly steep uphill battle to catch GM and Volkswagen. That's especially true when you consider that General Motors plans to invest upwards of $12 billion into its Chinese operations between 2014 and 2017 -- more than double what Ford pledged in 2012 -- and aims to increase production capacity by a staggering 65% by the end of this decade. Meanwhile, Volkswagen is satisfied with its early expansion into eastern Chinese cities, such as Beijing and Shanghai, and plans to push into Western cities to help push its annual sales increases up by double-digit amounts.

Indeed, Ford catching GM and Volkswagen will be a tough task, one that would take years, if not decades, to happen. To be fair, though, investors shouldn't gauge the Blue Oval's success in China by whether or not it catches GM and Volkswagen.

Plenty of upside
Rather than hoping Ford catches the two best-selling automakers in China, investors should keep an eye on different goals.

First, Ford hopes to increase its revenue generated in its Asia Pacific region, which is mainly China, from 8% in 2013 to 40% by the end of the decade. That would be huge for the company and its investors and would lessen Ford's dependence on North America for most of the company's revenue and profit.

Second, Ford plans to help revive its all but dead Lincoln luxury lineup by unveiling it in China. Make no mistake, Lincoln will also face tough challenges getting a foothold in the luxury market in China, but it has enacted a smart approach by building its brand-new dealerships in the biggest cities with the best-selling markets, and preparing its new model launches in the fastest-growing vehicle segments.

If Ford can indeed capture 6% of market share, surpass Nissan's and Hyundai's sales, and successfully roll out Lincoln's entry over the next couple of years in China, then it will be a huge success for the company and its investors.

Daniel Miller owns shares of Ford. The Motley Fool recommends Ford. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. 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.