Ford Gains Again in China on Big SUV Sales

By Markets

Ford is hopingthat a revamped version of its Kuga will help sustain its recent salesstreak in China. The Kuga is asibling of the U.S.-market Escape. Image source: Ford Motor Company.

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Ford Motor Company (NYSE: F) said that its sales in China rose 24% in September, on big sales of its popular SUVs.

It was the third month in a row of strong year-over-year sales gains for Ford in China, following a sluggish second-quarter result that had left investors concerned about its efforts in the region.

SUVs are powering Ford's China sales boom

Like most of its rivals, Ford doesn't report detailed model-by-model sales totals from China. While it sometimes highlights gains for models that have done well, it always reports aggregate results for each of its two joint ventures with local Chinese automakers, as well as an overall sales total that includes a small number of Ford- and Lincoln-brand vehicles imported into China from other parts of the world, including the United States.

Changan Ford, or CAF, is Ford's joint venture with Chinese automaker Changan Automobile. It builds and sells a portfolio of Ford-brand passenger vehicles. There are a few models or variations that are specific to China, but most would be familiar to Americans or Europeans.

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CAF sold 84,355 vehicles in September, up 25% from a year ago. Ford credited its SUV lineup for much of its gains in China last month, and CAF builds three of the best-sellers locally: the small Fiesta-based EcoSport, the Kuga (twin to the U.S.-market Escape), and the midsize Edge.

The Edge in particular has been a big hit for Ford in China, where it's built in a longer-wheelbase 7-passenger version. But Kuga sales could be picking up: The Kuga, like the Escape, was given an overhaul for 2017. Ford said those revamped models are beginning to reach dealers across China.

Ford also said sales of its recently revamped compact Focus rose 43% from a year ago. The Focus is positioned as a premium model in China, a step up from a more affordable compact sedan called the Escort; a jump in Focus sales is likely good news for Ford's bottom line.

Jiangling Motors Corporation, or JMC, builds Ford-brand commercial vehicles including the Transit commercial-van line and the midsize Ranger pickup, as well as a Ranger-based SUV called the Everest. JMC sold 23,416 vehicles in September, up 28% from a year ago.

Ford's other sales in China include the vehicles it imports. Among them: the Mustang, the Explorer, the ST high-performance versions of the Focus and Fiesta, and all Lincolns sold in China. Those sales totaled 22,522 in September.

After a rough first half, China is looking better for Ford

Ford was caught off guard in China in the early part of 2016. Local Chinese automakers were introducing much-improved products and stealing market share at the affordable end of the market, particularly with crossover SUVs.

Demand for SUVs is white-hot in China at the moment, and Ford had been doing well with the Kuga and EcoSport, but sales declined significantly in the first half of 2016, and that hit profits: Ford's equity income from China fell 28% to $296 million last quarter.

During Ford's second-quarter earnings call, CEO Mark Fields said the company had already begun taking aggressive action to stop the slide. Those moves included cost reductions, adjustments to product mix, and where warranted, some pricing adjustments.

The changes appear to have worked: Ford's sales in China were up strongly in each of the three months in the third quarter. It's hard to know how that will translate into profits since Ford hasn't given much detail on its pricing moves. But I suspect Ford's results from China will look a lot better when the Blue Oval reports its third-quarter results later this month.

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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.