Ford is FOCUSed
Rekha is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The automobile companies are witnessing a very significant fall in their share prices, the declining sales of cars amid the poor economic environment has led to such grim conditions. These auto companies are trying to keep their heads above water by adopting various strategies. They are intending to expand to markets they feel have great potential.
China and the US are the world's top auto sellers, but the European market has seen a great slump. Toyota (NYSE: TM) and Ford (NYSE: F) are expanding their markets to the ASEAN region. Toyota’s Corolla is one of the best selling cars but Ford Motor Co. claimed that the Focus is all set to beat Toyota's Corolla, to become the best selling car in world. In the first half of 2012 Ford sold 489,616 Focus sedans and hatchbacks worldwide. But Corolla is still the king in US where it outsold Focus by nearly 27,500 in the first half of the year even as Ford claims its sales were up 31% compared to 2011. The sales of Focus had been higher than the sales of Corolla at this time last year but Corolla pulled in the end by selling around 100,000 vehicles more than Focus.
Southeast Asia seems to be a bright spot for Ford Motor, where they say the sales were up 20% so far this year, which is double the pace of the sales increase in the US and China. Thailand, recovering from the last year’s flooding, saw a spike of 40% from last year. The Thailand plant has the capacity to produce more than 150,000 cars per year for sales in the ASEAN region.
Ford expects that there is going to be a further rise in the sales of the cars in this part of the world because of the expected rise in incomes over the coming years and would allow more people to buy new cars. The company has forecasted sales of five million by 2020. Matt Bradley, the president of Ford’s ASEAN region said, “It’s just like China or India in terms of growth opportunity.”
The minimum wage in Thailand is expected to be around $2,340 per year, the wages are expected to grow from 8% to 14% per year over next five years. Significant growth in the incomes may lead to more demand for the cars.
General Motors (NYSE: GM) has made a smart move by investing and boosting its production in Russia where huge demand for luxury cars have been significant. Toyota too finds the Russian market to be of great potential. They aim to expand production in the emerging markets. The company targeted to increase capacity of production in Thailand, where the auto parts supply industry is concentrated, it is also all set to make Thailand it's global base.
Toyota which had a significant head start in the region controls nearly 40% of Thailand’s auto market, whereas Ford controls only about 20% of the market share, but Ford is expecting to catch up fast. With the launch of eight new products and its latest manufacturing skills which enables it to manufacture six different vehicles simultaneously, Ford is not far behind to acheive its goal. The company is investing heavily and expanding aggressively to meet the needs of the customers in the Asia Pacific. The market here is expected to generate 60% of the industry’s growth through 2020.
The company is adopting new strategies for its growth in this region. It plans to launch new plants, which are expected to produce 2.9 million vehicles per year by the next five years. The company expects to bring fifty new vehicles and power trains to the market by mid decade. There are also plans to double the number of dealerships within the next five years. The production of its 350 millionth vehicle on Friday can prove to be a silver lining for Ford, as it makes smart moves and invests intelligently.
rekhamarwah has no positions in the stocks mentioned above. The Motley Fool owns shares of Ford. Motley Fool newsletter services recommend Ford and General Motors Company. 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.If you have questions about this post or the Fool’s blog network, click here for information.