Ford's Focus on the Global Market

Adam is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

According to research from R.L. Polk, the Ford (NYSE: F) Focus was the best-selling car in the world last year. While the automaker claims the Focus was the best-selling car in 2011 as well, Toyota (NYSE: TM) might say Ford hasn’t been able to make that claim since the Model T. Nonetheless, the 16% rise in Focus registrations from 880,000 to 1.02 million points to Ford’s successful focus on the global market and the state of the U.S. and Asian auto industry.

U.S. versus Japan

Ford is leading the resurgence of the U.S. sedan, a segment once dominated by Japanese automakers Toyota and Honda (NYSE: HMC). While pickup trucks from Ford and General Motors (NYSE: GM) have consistently done well in the United States, there’s significantly less demand abroad where compact cars are more popular.

Last year, Ford took three of the top six spots in the list of best-selling cars (Focus, F-Series, and Fiesta), and Toyota took two (Corolla and Camry). The Chevy Cruze came in eighth in total registrations, ahead of Honda’s Civic and CR-V.

Ford CEO Alan Mulally ought to receive a lot of credit for the company’s recent success. Since joining the company in 2006, he is responsible for keeping the company from going into bankruptcy like fellow Detroit automakers GM and Chrysler as well as balancing the product portfolio at Ford with smaller passenger vehicles. As a result, Ford is quickly expanding market share in emerging markets like China and India.

Focus on China

As Asian countries begin expanding their middle class, sales in the region will fuel auto sales growth across the industry. Ford appears poised to capitalize on the expansion of buying power in countries like China, India, and Indonesia where market penetration is less than 10% for the entire industry. Comparatively, there are 975 vehicles in operation per 1,000 Americans 16 years or older.

Focus registrations surged 51% in China, well ahead of its global rate of 16%. In order to keep up with demand, the company has been quickly expanding its assembly operations in the country. Last year, the company doubled down with new plants in Hangzhou and Chongqing.

Despite Ford's excellent growth in the region, the market is still largely dominated by General Motors and Volkswagen. While Ford’s wholesale numbers were up 46% in the first two month of the year to 105,209, GM sold 525,835 vehicles during January and February, a 7.9% increase. Meanwhile, Volkswagen’s Audi improved sales 16% in the country.

Toyota and Honda are still trying to recover from the consumer backlash sparked by the territorial dispute between Beijing and Tokyo. Both companies have seen declining sales in the country year-to-date. GM and Ford have both been picking up the lost sales from the Japanese automakers each improving sales by 30,000 to 40,000 units.

In the United States

While Ford’s F-Series and GM’s Chevy Silverado are the two best-selling vehicles in the U.S., Japanese automakers dominate sedan sales in the States. So far in 2013, Toyota’s Camry is still the best-selling car in America followed by Honda’s Accord and Nissan’s Altima.

Ford comes in fourth on that list. Interestingly, it’s not the Focus but the Fusion that’s selling well domestically. Ford unveiled a significantly redesigned Fusion late last year, leading to a 26% sales boost in the first three months of 2013. However, Ford will have a harder time growing U.S. market share than it does in China.

First, Ford’s production capacity in the United States is limited due to its restructuring efforts last decade. But more importantly is the effect of the Japanese Yen. The Japanese government has enacted policies that devalue the Yen to the U.S. Dollar. As a result, Japanese automakers are making more money of the cars they build in Japan and sell in the U.S. These policies open the door for Japanese companies to price their vehicles more competitively and boost their operating profits.

Mulally has publicly complained about the Japanese government’s role in determining the currency exchange rate. While he can’t control the value of the Yen, he has done an excellent job managing what is in his control. The Fusion is only slightly behind the Altima in sales, and is another indicator of Ford’s increasing strength in the sedan market.

Driving sales

The Focus is certainly at the forefront of Ford’s global sales growth. More importantly, the company’s global success with the Focus is indicative of Mulally’s successful strategy of broadening its portfolio and concentrating on the emerging markets. While Japanese automakers might currently have a leg up in the U.S. currently, Ford is making tremendous progress in cutting into those companies strengths, and hitting them in China where they’re hurting.

Adam Levy has no position in any stocks mentioned. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus