Ford (NYSE:F) has been trying hard to catch up with rival General Motors‘ (NYSE:GM) sales in China, which is almost five times that of Ford. The company has seen the potential for its products in this geography after recording a sales growth of 7% last year in spite of the overall Chinese auto sales growing by a meager 2.5%. However, the first quarter of the present year has been a dampener for the company as its overall sales have fell by 13.6% from its prior year. The company has cited weakness in the passenger car segment as the main reason for this decline.
In March, while the sales of Ford branded vehicles by company’s passenger car joint venture in China stood at 27,374 registering a decline of 17.3%, the sales of commercial vehicles rose by 0.5% and stood at 22,005 vehicles.  Ford competes globally with automakers like BMW (GR:BMW), GM (NYSE:GM),Daimler (ETR:DAI), Audi (NSU:GR), Honda (NYSE:HMC), Toyota (NYSE:TM) and others. We have a price estimate of $16, which is around 25% above the current market price.
The company has taken a variety of steps to increase its presence in this market, which is expected to grow at almost 5% in the short term. It has been looking to revamp its portfolio by 2015 in a bid to offer Chinese customers with more fuel efficient cars while also raising its overall capacity in the market. Although these steps are long term and expected to yield results in 2-3 years, the current situation shows that it needs to execute these plans flawlessly if the company is going to reverse its fortunes in China.
Revamping of the portfolio
The company aims to utilize state of the art technology in its upcoming models to deliver the customers with a superior driving and riding experience. It plans to incorporate turbocharging, direct injection, twin independent variable camshaft timing (Ti-VCT) and six-speed transmissions in its upgraded power train portfolio. These cars will also deliver 20% better fuel economy compared to Ford’s current passenger fleet while reducing tailpipe carbon dioxide emissions by 20%.
New capacity addition plans underway
Ford’s passenger vehicle joint venture Changan Ford Mazda Automobile (CFMA) intends to deliver 950,000 units by 2014 as Ford prepares itself to introduce 15 new vehicles by 2015 for the Chinese market. The firm had already announced plans to open four new plants in the region. It recently supplemented this by announcing a new $600 million investment in the manufacturing facility in Chongqing to support their expansion. The Chongqing plant will be fitted with a new assembly line, body and paint shop apart from its present two assembly plants and an engine plant. Notes:
- Ford China sells 12133 vehicles in 1Q Down 13%, Fox Business, 10 Apr-2012 [↩]
- Ford China announces USD 600 Million Chongqing Assembly Plant Expansion, Media Ford, 5 Apr-2012 [↩]