Ford Increasing Automobile Production in China

Published on Author ottman

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Ford is doing its best to take advantage if the surging wealth in the Chinese economy right now.  For this first time in their history, they are currently producing more cars in Asia than in Europe.  Morgan Stanley said in a report this month that it values Ford’s Chinese operation at $15 billion, which is more than a fifth of Ford’s stock market value.  They are comparing what is going on with the automotive industry in China to what happened a century ago when Ford released the Model T because Chinese families are finally starting to desire their own transportation.

In his first half year at the helm, Ford CEO Alan Mulally increased Ford’s market share in the Asia-Pacific region from 2.3 to 3.3%.   This is crucial because Ford has had to spend nearly $5 billion to catch up to companies ahead of them in the game, such as General Motors.

Ford is expecting to profit from operations in Asia this year, after losing around $77 million last year.  However, Ford recorded record sales in North America last year.  Though Ford has clearly been successful in North America, investors have been skeptical that they are not taking advantage of opportunities on other continents, but they are making a massive effort to get on the map.

Ford is smart to make its move on the Asian market during a time where wealth is growing so rapidly.  The key to success is staying one step ahead of the pack, and Ford is trying to repeat the success story they had a hundred years ago.  Fortunately, their move to Asia-Pacific has not limited growth or production in North America at all.  Rather than having a trade-off situation, it is becoming just an added bonus to the success that is already coming in their home market.

 

Source: http://www.bloomberg.com/news/2013-09-25/henry-ford-s-century-old-line-finds-15-billion-in-china.html

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3 Responses to Ford Increasing Automobile Production in China

  1. Comparing Ford’s emergence in the Chinese Market to the introduction of the Model-T is certainly an interesting analogy. Ford’s Market Cap is currently $68 billion according to Google Finance. The $15 billion market in China and the incredibly opportunity for growth are both promising prospects for Ford. It will be interesting to see how quickly the Chinese adopt the Ford automobiles.

  2. I think it is interesting this article doesn’t mention that Ford will soon be entering the Chinese market with its Lincoln brand. The first Lincoln dealership in China is supposed to open in 2014. Considering the popularity of Buicks and other American luxury cars in China, this launch will probably be key to helping to bolster the Lincoln brand and cement the popularity of Ford in China. Being able to compete on the high and low end would be advantageous in such a rapidly growing economy.

  3. The Ford Fusion is doing well. However, Ford is late to the game and has a small market share; since the CEO, Mullaly, was in charge of the very successful sales drive in China by Boeing, he is trying to change this.

    In a rapidly growing market, being late is not necessarily a barrier to growth. It may mean however that Ford has a weaker dealership network, in terms of geographic density and in terms of who they have as dealers. As the market matures – not too many people are on their second cars – this would limit their upside potential (and also make it harder for them to predict what level of production capacity they need to align with eventual sales).

    Sometimes being a follower means you can learn from the mistakes of others. I don’t think that will be true for the auto industry.