How far can Ford go in China?
The automaker says it expects to have a 5% market share in the country by the end of this year, double what it had 2 years ago.
By Ted Reed
But now the automaker is benefiting from rapid growth in lower central China, where Ford has a joint venture with Chongqing Changan Automobile. The business is based in Chongqing, a large city that borders Sichuan province. Together, Chongqing and Sichuan have about 110 million people, more than any Chinese province.
Ford said last week that it expects to increase its fourth-quarter market share in China to 5%, double its level at the end of 2011. The company has said it expects to have a 6% share by 2015.
"There's been a lot of investment from the central government into the inland regions, in terms of infrastructure investment and power generation," said Tim Dunne, director of global automotive operations for J.D. Power and Associates. "That helps Ford's growth. Ford is well-positioned, close to where the new buyers are coming from."
Dunne said Ford's expectation for 5% growth is realistic, but he cautioned that looking ahead Ford may not be able to grow so quickly. At 2.5%, he said, Ford "was lagging behind where they should have been.
"But now, as a global brand, they are close to where they should be and, as in any endeavor, the further you go, the more difficult the incremental increases become," he said.
Ford is benefiting this year from fallbacks by Japanese automakers, perhaps as a result of recent flare-ups in a territorial dispute between China and Japan. During the first eight months of 2013, according to J.D. Power, Nissan (NSANY) China passenger vehicle sales fell 17%, Toyota (TM) sales fell 8% and Honda (HMC) sales fell 3%, according to J.D. Power figures. During the same period, Ford passenger vehicle sales rose 73%.
It would be unwise to assume the Japanese will not recover as nationalist hostility diminishes, Dunne said. "Chinese buyers are shrewd," he said. "They will look carefully at what is the best investment for them personally."
For the first eight months, Volkswagen had a 15% market share in China, according to J.D. Power, while Hyundai had 8%, GM (GM) 7%, Toyota and Renault-Nissan each had 4%, while Ford and Honda each had 3%. Some tabulations credit GM with a higher share on the basis of a joint venture in which GM holds substantially less than the 50% that is typical for foreign companies in China.
Ford began producing cars in its joint venture in 2003, four years after GM and 18 years after Volkswagen. Because GM and Volkswagen arrived earlier, they signed partnerships with companies based in Shanghai and Beijing, which seemed more desirable at the time.
"In the late 1990s the Chinese government held a competition to partner with Shanghai Automotive to be the national luxury carmaker," Dunne said. "The competition got down to GM and Ford, and GM won by offering a Buick product. That was a big coup for GM, as a launching pad into China."
Ford's sales in China totaled 647,849 units in the first three quarters, up 51% from the same period a year earlier. Ford has committed to spend $5 billion to build five new plants in China, bringing its total to nine by 2015.
Ford posted a pretax profit of $183 million in Asia in the first half of 2013, a swing from a year-earlier loss of $161 million. Ford Asia chief David Schoch said last week that he expects the region to be profitable in 2013 and to be "a major contributor" to Ford profit by mid-decade.
More from TheStreet.com
All Ford has to do is pay back part of those loans like the others...
But I'm sure other parts were "grants" and not loans.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
Like many companies this winter, the fast-food giant blamed a drop in same-store sales on the weather. But could its problems be bigger than a snowbank?
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.