Ford (NYSE:F) in China


Ford (NYSE:F) Motors seem to get more and more comfortable in its new hub – China. The number of units sold in China through its joint venture with Changan has risen by 23%, as compared to last year. Looking at statistics, Changan sold 660,566 cars through October, which is well above the 536,421 figure it attained last year. Jiangling Motors Corporation, which is Ford (NYSE:F)’s Commercial vehicle investment in China sold 216,300 vehicles in the first ten months this year which is a raise of 16% from 186,920 last year.

Furthermore, statistics revealed that sales in China this year could easily cross the 1 million mark. The launch of Explorer and the Ecosport contributed to a sales jump of over 49%, along with earlier release of Kuga and the Focus. These frequent launches of new models have resulted in high sale figures in year over year gains. But the growth rate would eventually slow down.

Ford (NYSE:F) made its entry into the Chinese market very late as initially its focus was on its American operations. But the company is making up for the time it lost by investing $5 billion in the past four years, ever since it laid foot into the Chinese horizon in 2011. 15 new models will be launched in China in 2015. At the same time, Ford (NYSE:F)’s annual production will hit the 1.2 million units mark which is double the number it was back in 2012. Ford (NYSE:F) has such strong hopes attached with China that it predicts 40% of its sales coming from china only.

The Chinese automotive market is huge. In fact it’s the largest, with sales figures as high as 22 million last year. Whereas, the US market figures stood at 15.5 million in 2013, even though growth is expected but it’s expected to be slow. The Chinese market continues tobloom after country witnessed a rapid urbanization in its coastal region which contributed tremendously in vehicle demands. Now the same demand is travelling to the other parts of the region.

In 2015, Ford (NYSE:F) only expects a growth of 4 to 4.5% in the long run as there has been a slowdown due to efforts made to reduce pollution. But there are additional opportunities to make up for this lost. These come in the shape of luxury cars. The demand for which gone up in the recent past, resulting in 8% rise of demand. In order to cater to these demands, Ford (NYSE:F) plans to launch its Lincoln line in China in 2015. But the nameplates will be exported from US, which would lead to high import duty. This could result in high prices, which would scare off potential buyers forcing them to opt for locally produced German luxury car, which already hold a strong perception in the Chinese market.

But it is also common for automakers, to sell off their luxury brands at a premium price as Chinese are fascinated with Western products. This could result into a huge contribution for the bottom line.