Can Ford Win in China? Do the Math

CHONGQING, China (TheStreet) -- Ford (F) has high hopes for China, as it must.

Sales figures in May tell both sides of the Ford story in China, which is not only the world's biggest auto market but also one of the fastest growing. For the month, Ford sales climbed 23%, GM> (GM) sales climbed 21% and total sales by all manufacturers climbed 16%. But GM sales totaled 231,183, while Ford sales were 34,550, about 14% of GM's total and about 2% of the market.

Growth in China may be slowing, but GM and Ford reported double-digit sales gains there in February.

For Ford, China presents the classic glass half empty/glass half full dichotomy. Ford is tiny in China. Yes, but it has room to grow!

Tim Dunne, director of global automotive operations for J.D. Power and Associates, who lived in China for 12 years, said he "would never discount Ford.

"Was Honda (HMC) too late when it set up its first U.S. plant in 1982? And who would have expected the ascendance of Hyundai and what they've done here over the past 10 years?"

Dunne said it takes leadership to fuel auto company advances and noted that Carlos Ghosn turned around Nissan. Similarly, Ford does not suffer from a leadership vacuum. "A lot depends on who's running the show and their vision," Dunne said. "That is true at every company. Look at what Alan Mulally has done (in the U.S.)."

Another key consideration is to have product available, and here Ford is making a major commitment in China and Asia, projecting a total $4.1 billion in spending.

During an investor conference presentation last week, Joe Hinrichs, Ford president for Asia Pacific and Africa, laid out the case for Ford growth in China. Hinrichs' slides showed growing demand and Ford's growing manufacturing capacity, vision of entry into new market segments and continuing expansion of its dealership network.

Looking at demand, China bought 24% of the world production of 79 million vehicles in 2011, and will buy 29% of 112 million vehicles in 2020. That is 32 million vehicles, up from 19 million today. Two other markets -- India and ASEAN (Thailand, Indonesia, Malaysia, Philippines and Vietnam) also have rapid demand growth projections. The reason, in each case, is that once people reach an income level of $5,000 to $6,000 annually, they become potential car buyers. Ford assumes a 2% purchase rate by more than 2 billion new car buyers by 2020. In China, over 74% of vehicles are sold to first-time buyers.

1 2 3 Next › Last »