The Chinese sales make General Motors Company (NYSE:GM) the no. 2 highest-selling car company in China, and well-positioned to take advantage of it when the nation’s economy really starts to surge. There is a tremendous amount of opportunity in China. The nation has about 1 billion people more than there are living in the U.S., and its economy that has a ton of room to grow.
General Motors Company (NYSE:GM) looks to compete in car division
While General Motors Company (NYSE:GM) is a leader in truck models, it has lagged in the car division. The company’s car models appear to be of the highest quality they have ever been, however. If the firm is able to compete in the car division which has lower base costs, it will be set to make amazing profits in the years ahead. A large number of the company’s stock shares are owned by governments, however, and this poses a risk if the governments pull their shares. The U.S. Treasury, for example, is set to sell about 16% of its 500.1 million shares.
Ford’s stake in China
As Ford Motor Company (NYSE:F) looks to increase its stake in the Chinese economy, the firm’s gains there will outpace the industry this year. Ford Motor Company (NYSE:F) sales increased by about 48% in the first five months of this year. A large portion of the sales are for vehicles like the EcoSport, the Kuga sport-utility vehicle and the Focus. As with General Motors Company (NYSE:GM) investors, those who put money in Ford could see substantial profits in the years ahead from sales to the nation.
Ford Motor Company (NYSE:F) becomes even more attractive when you consider that it has doubled its dividend and received an investment-grade credit rating from major credit agencies. That means that the company can more easily secure funds for future projects. Ford Motor Company (NYSE:F) is also making its operations more efficient, focusing on nine platforms instead of the 27 platforms that it had in 2007. This focus will help the company to meet global demand will reducing its costs through improved economies of scale.
Toyota improving Chinese relations
As Toyota Motor Corporation (ADR) (NYSE:TM) struggles with a backlash from China, it is experiencing positive news from one area of the nation. Toyota Motor Corporation (ADR) (NYSE:TM)’s Chinese sales fell after a territorial conflict between Tokyo and Beijing last September. Toyota stated it will focus its sales on Southern China, however, which has historically low anti-Japanese sentiment. In fact, a Toyota executive told Reuters earlier this month that southern sales have recovered to their pre-September level.
The company’s manufacturing expertise is among the best in the industry, and that is important during a time when stricter environmental laws are increasing costs for automakers. This efficiency of productivity could put Toyota Motor Corporation (ADR) (NYSE:TM) ahead of the competition when it comes to having low operating expenses. While Morningstar has given the company’s stock a fair value outlook at $119 and the company is currently priced at about $124, I think that the longer-term outlook is much more promising. As relations with China continue to improve, so will sales to the nation.
China is the place to be
The Chinese passenger vehicle market is set to increase by about 8.5% to 16.8 million this year, according to a report from the China Association of Automobile Manufacturers. The report goes on to state that the commercial-vehicle purchases will likely rebound from 2012 when it experienced a 5.5% contraction. That contraction moved sales to about 3.85 million vehicles.
The coming improvement means that companies which are already weighted in the Chinese economy will likely see greater profits throughout this year. Getting in now before these companies report quarterly earnings will set you up nicely to realize the gains these firms have realized over last year. And as a bull in the Chinese economy, I see investing in companies with solid exposure to these nations to be sound investments.
The article 3 Automakers With Heavy Chinese Exposure originally appeared on Fool.com and is written by Phillip Woolgar.
Phillip Woolgar has no position in any stocks mentioned. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Phillip is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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