Ford Motor Company (NYSE:F) has been spending big bucks to expand its lineup in China, and recent sales results suggest that Chinese consumers are liking what they’re seeing: The Blue Oval’s sales through the first two months of 2013 were up 46% over year-ago totals.
That’s huge. How huge? It trounced market leader General Motors Company (NYSE:GM)‘ 7.9% gain over the same two months – itself a good result for a period in which sales at rivals Toyota Motor Corporation (ADR) (NYSE:TM) and Honda Motor Co Ltd (ADR) (NYSE:HMC) actually declined.
More to the point, it’s proof that Ford’s product strategy is playing quite well in China – and that bodes very well for the Blue Oval’s ongoing expansion plans.
While most automakers report monthly sales results in the areas in which they do business, automakers doing business in China generally present their January and February results as a combined number. That’s because Chinese New Year, a week-long holiday celebration, sometimes falls in January (like in 2012) and sometimes in February (as it did this year) – making year-over-year monthly comparisons complicated.
But this year, despite losing a week of sales to the holiday, Ford Motor Company (NYSE:F)’s Chinese operation still posted a sales gain of 7% in February that looks even better when you dig into the details.
Ford Motor Company (NYSE:F) operates two separate joint ventures in China: Changan Ford Automobile, which produces familiar global Ford cars like the Focus, and a joint venture with Chinese truckmaker Jiangling Motors that produces Ford-branded commercial and government vehicles based on Ford’s Transit and E350 vans.
Of those two, Changan Ford Motor Company (NYSE:F) is the more significant operation, outselling the truck venture by more than two to one. And its sales have been rising sharply lately – up 39% in February alone — as Ford Motor Company (NYSE:F) brings more of its well-regarded global products to the Middle Kingdom.
Familiar Fords finding success in China
Ford Motor Company (NYSE:F) introduced its current global Focus compact to China last spring, with a twist: It’s called “New Focus” and positioned as an upscale offering alongside the prior-generation (“Classic Focus”) model. It has proven to be quite popular, as the two Focuses have combined to become one of China’s best-selling nameplates.
The (New) Focus was the first of 15 new Fords destined to be launched in China by mid-decade, and its success promised good things for the models that followed. The latest of those is the Kuga SUV, a near-twin of the Escape SUV in the U.S. market. It made its Chinese debut early this year and appears to be competing well with its key local rivals, Volkswagen’s (NASDAQOTH: VLKAY) Tiguan and Honda’sCR-V.
The market for SUVs in China has been strong in recent months, a bright spot amid sluggish growth in the overall automotive market. That strength hasn’t been lost on Ford Motor Company (NYSE:F), which is planning to expand its Chinese SUV lineup by two in the next few months: The EcoSport (a small inexpensive SUV based on the Fiesta) and the familiar-to-Americans Explorer will both be offered to Chinese consumers soon.
The upshot: Big expansion appears to be on track
Ford’s ambitious plans to expand in Asia – which are expected to drive significant bottom-line growth later in the decade — are centered on finding success in China, which has become the world’s largest auto market. So far, so good: The sharp sales increases of recent months suggest that Ford’s global-product-centered approach is playing as well with Chinese consumers as it has elsewhere.
Ford’s prospects in Asia are a big part of why I think the stock continues to be a buy at current prices. While Ford’s 2012 earnings were strong, thanks to the “One Ford” approach that has led to great margins in North America, the potential gains as it exports “One Ford” to its regions around the world are significant – and could lead to significant gains for the stock in coming years.
The article Ford Races Forward in China originally appeared on Fool.com and is written by John Rosevear.
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