Ford's EV plans in ChinaElectric vehicles are in the last year the biggest consumer of Li-Ion batteries. LI-ION batteries use 6 times more grapite by weight than they use LI. So the enormous growth of LI demand becuase 13 Gigafactories are expected to come on line over the next 4 year, will drive a huge increase in LI demand and obviously a huge incease in grapite demand.
That is all pre-amble to Ford's plans for EVs in China.
Ford's Impressive Growth In This Market Is Set To Continue
Summary
Ford has already cracked 1 million unit in sales in China this year, which is great news for the company as it gets 15% of its sales from this market.
Ford’s growth in China has been faster this year, with sales growing 11% in the first 11 months as compared to total sales increase of 3% last year.
Ford’s Chinese growth has gained momentum on account of its focus on key growth markets such as SUVs and electric vehicles.
Ford will have 25% electric vehicles in its Chinese portfolio by 2020 by launching 13 new EVs, which will help it capture the rapid growth in the Chinese EV market.
China’s pick-up truck market will grow 14% this year and could improve further as driving regulations are eased, which is why Ford is bringing the F-150 raptor to China.
Ford's (NYSE:F) latest China strategy seems to be paying off. The company released its sales figures for China early last week and the numbers indicate that the company is making rapid progress in this fast-growing market.
In fact, Ford has cracked the 1 million unit sales mark already in China this year by recording impressive sales growth over 2015. This is good news for investors as China accounted for 15% of Ford's sales last year, and it is likely that this market will become even bigger in 2016. I am saying this because Ford has increased its China sales by 11% in the first 10 months of 2016 as compared to sales growth of just 3% in entire 2015. This means that Ford's Chinese revenue growth will be stronger in 2016 and the market will contribute more its overall revenue.
What's more, in the long run, it is likely that Ford will continue to improve its sales in China since it is focusing on the right products. So, let's take a look at how Ford has done in China this year and why it can continue to get better.
Ford cracks the million barrier in China
Ford, together with its joint ventures, sold 124,113 vehicle units this November. It was a record in itself and indicated a jump of as much as 17% over the month of November 2015. This has further boosted Ford's morale in China, which still carries the distinction of being the largest in the world even after all the economic disturbances it has been facing since the middle of last year. In fact, driven by its November performance, Ford has sold about 1.09 million vehicles in China this year, which is almost 11% better than last year.
"Ford is gaining more momentum in China each month and we are on pace for a record year in China," said Peter Fleet, vice president of Marketing, Sales and Service, Asia Pacific.
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Among the broad market segments, Ford sold 96,191 passenger vehicles through Changan Ford Automobile last month, which is Ford's passenger car joint venture in China. Ford's passenger car sales in China, as a result, increased 14% as compared to the same month last year. Even year to date, Ford's passenger vehicle sales have increased 14% to 842,000 vehicles till November.
The other category, i.e. commercial vehicles, is growing at an even faster pace. Through its commercial vehicles joint venture in China, the Jiangling Motor Corporation, Ford sold 26,285 commercial vehicles in November, an increase of 29% year over year.
What's driving Ford's Chinese growth?
Ford's SUV family has proven to be the biggest sales driver for the company. For instance, the Ford Explorer registered an increase of 73% in November sales to become the leading model for Ford in China. The other high selling SUV, the Ford Edge, sold 21% more copies this November and its year-to-date sales have more than doubled as compared to last year.
"We are seeing increasing demand across our line up, particularly our family of SUVs." Peter Fleet said in the press conference during the release of November sales.
Additionally, Ford's small cars have not disappointed either. Among the small sedans, the new Ford Focus sold 28% more units and the Ford Escort sold 50% more copies compared to last November. Another success story for Ford this year has been the Ford Mustang. The highly celebrated muscle car saw a 48% increase in sales from last year, with overall sales increasing 40% in 2016 so far. Thus, it is evident that Ford is witnessing growth across its portfolio in China.
What next for Ford in China?
Ford is investing in the right areas in China in order to tap growth in the long run. For instance, the company plans to have 25% electric vehicles in its Chinese portfolio by the end of the decade. To pursue this target, Ford will be introducing 13 new electric vehicles in China going forward. In my opinion, this is a smart move from Ford since the share of EVs in China's automobile market is expected to go up to 3.8% in 2020 as compared to 0.4% a couple of years ago.
Additionally, Ford is also looking to bring its F-150 Raptor pick-up truck into the Chinese market as regulations on truck driving are eased in provinces across the country. With the F-150 Raptor, Ford will be targeting the high-value SUV segment in China such as luxury buyers or business owners. This, again, is a smart move by the company since sales of pick-up trucks in China are growing at a decent pace.
This year, for instance, China's pick-up truck market will grow 14%, according to IHS Markit, to almost 370,000 units. However, as total pick-up truck sales will only be 1.4% of overall vehicle sales in China, there is a lot of runway for growth in this market. As a result, Ford is doing the right thing by moving early in this market by bringing its flagship pick-up truck.
Conclusion
China is a bright spot for Ford as it is enjoying consistent double-digit growth here in contrast to the U.S., where sales growth has remained relatively flat in recent times. The growth of the SUV market has driven its sales in the country, while electric vehicles will prove to be the next catalyst for Ford. Hence, as China accounts for a substantial portion of Ford's overall sales, further growth in this market will lead to stronger financial growth in the long run.
Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.