Ford's One-Car China Turnaround
Ford Motor Co. (NYSE: F) has released a new car in China. It says the new vehicle is aimed at China’s middle market, which is growing. Ford’s fortunes in China are so badly damaged that it will need enough models to fill a showroom to hope for a turnaround.
The company announced:
Ford released an all-new mid-sized sport utility vehicle in China on Monday, as the automaker contends with an aging product line and flagging sales in the world’s biggest car market.
The Ford Territory is aimed at mid-sized SUV customers in small but fast growing cities across China, which Ford said is the country’s fastest growing market. The vehicle was developed with Ford’s local partner, Jiangling Motors.
What is “said” and what is accurate are not the same thing. Ford offered evidence that its approach has a foundation in facts:
The Territory’s position as a midsize SUV will help Ford reach new Chinese car buyers who are generally in their 30s, educated, and are looking for a reliable, practical vehicle for their growing families. These consumers are transforming China’s second-tier cities with their appetite for higher-quality, affordable products, including vehicles.
Although small by China standards, these fast-growing cities are still massive, with populations nearing the same size as New York City – 8.5 million. By 2020, vehicle registrations in these smaller cities, which do not have the same license plate restrictions as those in megacities like Beijing and Shanghai, are forecast to climb to 23.7 million, more than doubling since 2010.
New York City’s population is 8.5 million. Not all of those people buy a car each year. The number cannot be more than a few hundred thousand per annum. Since New York is an urban area where people probably are less likely to drive, the number may be smaller. Even if Ford is using New York City for a rough comparison, it would need to have a large market share in these cities to help sharply improve falling China sales, which have accelerated.
Ford China sales dropped 43% in September to 64,383. The country is mobbed with cars and light trucks from every major car company in the world and from car companies based in China. One car is not going to change Ford’s fortunes, nor are two or three.