Ford Looks To S. Korea As The Next Asian Growth Engine

by Trefis Team
+41.98%
Upside
14.17
Market
20.12
Trefis
F
Ford
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Ford Motors (NYSE:F) is hitting the gas in Asia. After the automaker announced last week that it will roll out is luxury brand Lincoln in China by 2014, CEO Allan Mulally said the company will launch 6 new models in South Korea this year. The models will include new versions of Escape SUV, Fusion, Mustang, Taurus and the diesel variant of Focus. Besides the new introductions, the automaker will spend $45 million in 2012 to expand dealership networks and set up 15 new shops and service centers in the country.

The global trend of high fuel prices have led to an increase in demand for fuel efficient cars, and Ford will ensure its cars are fitted with fuel-efficient engines ranging from Ecoboost to hybrid and diesel to cash in on this demand.

See full analysis for Ford Motors

Foreign Companies Look At South Korea

Currently, Ford has less than 1% of the South Korean auto market, but sales for the first seven months of the year are up 28%. South Korea’s auto market is dominated by the local players such as Hyundai and Kia, but the share of imported cars is rising after the country signed free-trade agreements (FTA) with the E.U. and the U.S. South Korea’s FTA with the U.S. came into effect in March 2012. [1]

Ford has traditionally lagged behind global auto majors such as General Motors (NYSE:GM), Toyota (NYSE:TM) and Volkswagen AG, but the company is investing significantly in the region to increase capacity and expand the product line as it looks to cut its dependency on the North American market.

Besides China and South Korea, India is likely to become one of the key markets for Ford with sales in August up 16% y-o-y. [2] With an eye on not only the domestic Indian market but also foreign markets in Asia/Pacific and Africa, Ford plans to make India a low-cost export hub for its cars and engines. Earlier in the year, the automaker completed a $72 million plant expansion in Southern India, which saw its capacity rising by 36% in the country.

We have a $12 price estimate for Ford, which is about 30% higher than the current market price.

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Notes:
  1. Ford Builds Asia Sales, August 31, 2012, wsj.com []
  2. Ford sales for August 2012, September 1, 2012, gaadi.com []
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