Ford Reaches $14 Fair Value Shifting to Overdrive in China with Fuel Efficiency Focus
At the recent Guangzhou auto show in China, Ford (NYSE:F) announced its plans for aggressive growth in the country with several planned model launches and ramping up of its production capacity. Ford expects China will remain the largest car market for the foreseeable future, but its sales in China still trail that of its rival General Motors (NYSE:GM) by a wide margin. [1] Ford aims to bring 20 new engines and transmissions and 15 new vehicles by 2015. Over the same period the company aims to improve its fuel-efficiency across its entire fleet by 20 percent. [2] We expect that Ford’s focus upon introducing its full lineup of Ford branded vehicles, providing better fuel-efficiency and localizing its vehicles to suit local requirements will help the company gain market share in China in the medium-long term. Ford mainly competes with General Motors, Toyota (NYSE:TM), and Honda (NYSE:HMC) globally.
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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Ford’s expanding vehicle line-up in China
China is the most important market for Ford in the Asia Pacific and African region, accounting for nearly 60% of Ford’s sales in the region. This makes China one of the most important growth markets for Ford, and the company is investing heavily to realize its potential in the country.
Ford plans to launch 15 new vehicles in China by 2015, focusing on fuel-efficiency, safety and smart technology to help drive its sales and increase market share in the international markets. Its presence in every car segment will boost sales by expanding customer options and competing more effectively against rivals such as GM, which already has an impressive vehicle line-up in China.
Efforts to improve fuel-efficiency by 20 percent
To build upon its aggressive growth plans in China, Ford along with its passenger vehicle joint-venture partner Changan Automobile Group invested another $350 million for a transmission plant. [3] The company’s total investment in China now stands at $3.5 billion.
This year Ford introduced its patented turbo-direct injection EcoBoost technology in the Chinese market. This technology provides up to 20 percent better fuel efficiency and a 15 percent reductions in emissions and thus provides significant, immediate and cost-effective improvement to petrol engines. We believe that cost savings offered by this technology will help Ford increase its market share by targeting price conscious Chinese customers.
At the recent Guangzhou auto show, Ford announced plans to bring 20 new engines and transmissions to China by 2015 to support its planned new vehicles for the market. The company plans to use its EcoBoost engine and PowerShift six-speed automatic gearbox to improve its fleet-wide fuel-efficiency by 20 percent by 2015 to attract more price conscious Chinese customers, which will help the company expand its market share in the country further. ((ref:2))
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