Business / Auto China

Ford sees profit in China after expansion push

(Agencies) Updated: 2013-04-16 18:00

Ford in 2012 held a 3 percent market share, well behind industry leaders Volkswagen AG and General Motors Co.

Ford's sales gains have been impressive, but like Volkswagen's recent gains in the US market, they come from a low base. Ford's China sales in the first quarter were 186,596, up 54 percent. By contrast, GM sold 2.84 million vehicles in China last year, up 11 percent.

Level of investment

While Ford's investment in expanding its footprint in China is aggressive, it is investing less than either Volkswagen or General Motors in its effort to catch up to the leaders after getting a late start. Ford did not sell any cars in China until 2003, when Volkswagen and GM had already laid a solid foundation with their Chinese joint venture partners.

Sales of a single Volkswagen model, the Lavida compact car, in February were higher than all of Ford's lineup of passenger cars in China.

Volkswagen plans to invest more than double what Ford will spend by 2015 in China, and GM said in 2011 it would spend up to $7 billion through 2015 and has hinted that it will up its spending beyond that.

LMC Automotive analyst Zhu Bin in Beijing said the level of Ford's rate of investment in China is at the right pace. He said Ford needs to build the foundation that VW and GM built years ago before it gets even more aggressive.

"Ford should wait and see if they need more investment" in China once its planned plants are up-and-running in 2015, said Zhu. "The market in China will not grow as significantly as it has in the past."

China is also concerned about overproduction, Mulally said.

Asia soon top Ford market

Of course, when Ford's executives spent only 10 percent of their time worrying about Asia, they could be forgiven for paying attention to existing operations. Ford lost $30 billion between 2006 and 2008, and its share price reached $1.01 in late 2008.

Last year Ford made a net profit of $5.7 billion, its fourth straight year in the black. It's shares now trade above $13.

China and the rest of Asia will account for 40 percent of Ford sales by the end of this decade. China last year became Ford's second-biggest market behind the United States, and is nearly twice the size of its third-largest country in sales, Britain.

"Clearly this is going to continue to be the highest rate of growth for us over the next few years it's going to be one of the major contributors to our revenue and our profit," Mulally said.

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