A Commercial-Vehicle Slump Hits Ford's China Sales

By Markets Fool.com

Ford was pleased with the sales of itsnew China-only Taurus sedan last month. But slumpingcommercial-van sales hurt the Blue Oval's overall result. Image source: Ford Motor Company

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Has Ford Motor Company hit a wall in China? The Blue Oval's sales in the world's largest auto market slipped again in May.

What Ford said

Ford has two joint ventures with local automakers in China. Changan Ford Automobile (CAF) builds and sells mostly familiar Ford passenger vehicles, and Jiangling Motor Company (JMC) produces commercial vehicles including some of Ford's Transit vans. CAF sold 67,055 vehicles in May, roughly flat from a good result a year ago. But JMC's sales fell 4% to 19,692 vehicles.

Ford also sells some vehicles in China that are made elsewhere and imported. Sales of imported Ford models fell 45% to 1,501 vehicles in May.

For the most part, Ford doesn't break out sales of specific models in China. But its statement about May sales noted that it sold over 8,500 examples of the Edge SUV, while sales of an all-new (and so far, exclusive to China) version of the big Taurus sedan totaled "nearly 2,500" last month.

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A slump incommercial-vehicle sales is hindering Ford's growth efforts

Ford's China operation started the year strong. But May was the second month in a row in which the company recorded a year-over-year sales decline in China.

An industrywide slump in commercial-vehicle sales has played a big part in Ford's sluggish sales in the last few months. A massive construction boom that lasted for several years has faded, and contractors and tradespeople aren't getting as much work -- and thus aren't buying as many new vehicles.

As in other parts of the world, commercial vehicles are an important component of Ford's business in China. The slump has hit JMC hard: Its sales are down 12% year to date, dragging down Ford's overall results.

But Ford's retail offerings have continued to do fairly well. CAF's sales are up 11% year to date, driven by strong results for Ford's crossover SUVs. Chinese buyers, like their counterparts in Europe and the United States, are migrating away from sedans in favor of car-based crossover SUVs.

Ford's strong global SUV lineup has helped it sustain gains in China -- but at the same time, competition (and pricing pressure) has been fierce as domestic Chinese automakers have made gains with SUVs, particularly at the lower end of the market.

How Ford will respond to pressures in China

Ford will soon roll out more hybrids in China, including a plug-in hybrid version of the midsize Mondeo sedan (a near-twin to the U.S.-market Fusion Energi). The hybrid Mondeo will be made in China, which will make its buyers eligible for government incentives. That should help boost Ford's sedan sales -- but continued pressure on the commercial-vehicle market may make it hard for Ford to find sales growth in China for a while.

The article A Commercial-Vehicle Slump Hits Ford's China Sales originally appeared on Fool.com.

John Rosevear owns shares of Ford. The Motley Fool owns shares of and recommends 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.