Ford Can Boost Its Stock Price 20% By Meeting Lincoln Sales Target
Compared to other auto companies, Ford‘s (NASDAQ:F) presence in the luxury segment is extremely low. This is important as luxury vehicle sales form around 10% of the overall sales of the U.S. car market. However, owing to their higher than average transaction prices and higher margins, they contribute about two-fifth of the industry’s revenue and nearly half its profits.
Keeping this in mind, the picture below is an alarming one for Ford:
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Compared to GM, Toyota and Honda, Ford’s luxury car brand Lincoln forms a much smaller percentage of its overall car sales in the U.S. car market, the world’s second biggest car market and the biggest luxury car market. While Lincoln fares poorly in the U.S., it has received much much better reception in China, the world’s second biggest luxury car market, and soon to be the biggest if its growth rate remains in the same. In 2015, luxury car sales in China stood at 1.7 million compared to 2 million in the U.S.
Ford launched Lincoln last year in China, selling over 11,600 units in its first year, taking its overall sales close to 120,000. The auto maker hopes to sell around 300,000 units of the brand by 2020, implying a growth rate of close to 20% over the period. The table below shows the huge impact achieving that target can have on Ford’s stock price:
Have more questions about auto companies? Click on the links below:
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Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Ford Motor
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