Ford’s Emerging Markets Strategy Lifts Outlook

+8.62%
Upside
14.23
Market
15.46
Trefis
F: Ford Motor logo
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Ford Motor

Ford (NYSE:F) has outlined its focus upon emerging markets and Asia-Pacific region to drive its growth over the next ten years given the economic slowdown in developed markets. The company expects Asia-Pacific region to drive 70 percent of its growth over the next ten years. [1] To capture the immense growth opportunity, Ford is positioning itself for these markets through the One Ford plan, which aims to increase parts commonality and produce vehicles globally over 13 core platforms. This will help lower Ford’s development costs and will promote its competitiveness through the ability to decrease vehicle prices. Also the company aims to serve the local markets by providing a full line-up of Ford brands to expand customer choice and by focusing upon improving fuel-efficiency, safety and smart technology to provide buyers a better bang for their buck. Ford mainly competes with General Motors (NYSE:GM), Toyota (NYSE:TM), and Honda (NYSE:HMC).

Our price estimate of $14 for Ford’s stock is around 45% above the current market price.

See our complete analysis for Ford stock here.

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Common global platform to help price competitiveness and margins

Under the One Ford plan the company aims to build common global platforms to develop new models for different markets. With a global platform, Ford can accrue massive cost savings through the use of common sets of vehicles parts and spares to make vehicles. This will help reduce costs in terms of engineering time, parts and services, as well as tools and machinery. By 2014, Ford aims to produce at least 80 percent of the vehicles sold globally under the Ford brand off 13 core platforms.

These cost savings will not only boost Ford’s margins but also enable the automaker to price its vehicles competitively in emerging markets such as China, India and Brazil to drive sales. It will also improve Ford’s reaction time in adapting vehicles to suit local market requirements.

Investment in expanding manufacturing

Ford has already been investing heavily to build up its production capacity in China to support its aggressive expansion plans in the country. [2] The company is also building a large vehicle manufacturing plant in Thailand, which is scheduled for completion in 2012. [3] The facility in Thailand will be capable of building a diverse range of vehicles for Asia-Pacific region, in keeping with Ford’s plan to offer its full vehicle line-up in these markets. In addition, Ford has also been investing in India, in keeping with its expectation of India becoming the world’s third largest auto-market in the next ten years. [4] We believe that these investments will support Ford’s market share growth in international markets in the long-term.

You can drag the trend line in the modifiable chart above to see the impact on Ford’s stock value.

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Notes:
  1. Ford: Ford Global Expansion and Growth []
  2. Ford China Breaks Ground on Second Engine Plant []
  3. FORD ANNOUNCES US$450 MILLION INVESTMENT FOR NEW FLEXIBLE PASSENGER VEHICLE PLANT IN THAILAND []
  4. Ford’s $1 billion India Investment Announcement []