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Why Ford's China Sales Jump Might Be Less Than It Looks

By John Rosevear - Feb 8, 2016 at 2:15PM

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Ford's sales in China jumped 36% in January. But a quirk of the Chinese calendar might have had a lot to do with the results, and Ford shareholders should be cautious about these numbers.

The Ford Escort, an affordable compact sedan developed for the Chinese market, was one of the Blue Oval's big sellers in January. Image source: Ford Motor Company.

Ford (F 0.18%) said its sales in China rose 36% in January, with record results for several key models.

What's happening: Ford has two joint ventures in China. The first, called Changan Ford Automobile, builds and sells Ford-brand passenger vehicles, many of which are familiar to Americans. The second, Jiangling Motors Corporation, builds and sells several of Ford's commercial vehicles, including the Transit van lineup and the Ford Ranger pickup. 

Sales for Changan Ford rose 58% in January, to 111,856 vehicles. Ford said the Mondeo (twin to the U.S. Fusion sedan), the Escort (a China-only compact model), and its SUVs as a group all posted record January sales results. 

Results were less impressive at Jiangling Motors, which is suffering from a general slowdown of China's commercial-fleet market. Sales fell 24% from a year ago, to 17,255 vehicles. 

What it means for Ford: Before we can get too excited about Changan Ford's big sales gain, I have to give a note of explanation about the Chinese calendar. A major holiday, China's Lunar New Year, sometimes falls in January and sometimes in February. That's important because many Chinese businesses are closed for several days around the holiday.

Last year, Lunar New Year fell in January -- but this year, it was in early February. That probably had a lot to do with Ford's big sales gain in January, and it may mean Ford's February results from China look disappointing by comparison. 

The Ranger-based Everest joined Ford's fast-growing China SUV lineup last year. Image source: Ford Motor Company.

Analysts seeking to understand sales trends in China generally look at January and February sales together and compare them to the same period in past years. 

Ford wasn't the only automaker to post a big sales gain in China in January. Toyota (TM -1.05%) posted a 32% year-over-year gain for the month, to about 125,000 vehicles, roughly 4,000 behind Ford's total. Honda (HMC -1.38%) boosted its deliveries nearly 21% to 107,357 for the month, while Nissan's (NSANY -1.87%) China sales rose 9.4% to 127,300 vehicles. 

We'll have to wait another month to see whether those results (for Ford and its rivals) represent a big success or just a quirk of the calendar. 

That said, the SUV sales in particular are an encouraging sign. Ford now sells five SUV models in China, ranging from the tiny EcoSport up to the Ranger-truck-based Everest. The other models are the hot-selling new Edge SUV, which Ford offers in a three-row version in China, the Kuga, which is the Chinese-market sibling of the Escape, and the Explorer.

What's next: China's fast-growing new vehicle market slowed significantly in 2015. But Ford managed a good result, thanks in part to its efforts to bring more SUVs to China. January's results look impressive at first glance, but it's hard to know what they really mean because of the timing of the Lunar New Year holiday.

We'll know a lot more about how Ford (and its rivals) are really doing in China after February's results are in. 

John Rosevear owns shares of Ford. The Motley Fool owns shares of and recommends 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.

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