China’s Slowdown No Deterrent for Automakers, at Least in 2Q15


Aug. 6 2015, Updated 9:06 a.m. ET

China’s slowdown

Previously in this series, we discussed the 2Q15 financial performance of Ford’s (F) European operations. In this part, we’ll explore how Ford’s Asia-Pacific operations fared in the quarter. Asia has emerged as the biggest automobile market globally—led largely by China (FXI)(MCHI). However, vehicle sales in China declined in June compared to last year. This marks the first yearly decline for China’s vehicle sales in over two years.

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Ford had a record second quarter

The slowdown in China’s car sales has failed to deter automakers’ 2Q15 earnings. Ford had a record second quarter in its Asia-Pacific operations. Ford posted pre-tax profits of $192 million in 2Q15 in Asia-Pacific at a healthy operating margin of 7.8%. You can see this growth in the chart above.

China is Ford’s biggest market in Asia-Pacific, and it had a 4.7% market share in China in 2Q15, up 10 basis points from last year.

General Motors (GM) also had record sales of 1.7 million units in the first half of 2015 in China. GM’s China joint ventures generated equity income of over $1 billion in the first half of 2015 at an impressive net profit margins of 10.1%.

However, Tata Motors (TTM), which owns the luxury brand Jaguar Land Rover, has been severely hit by the slowdown in China’s automobile industry.

The Middle East and Africa

Ford consolidates its earnings in the Middle East and Africa as one segment. Ford’s operations in this region generated a pretax loss of $46 million in 2Q15. Last year, the segment had posted a pre-tax profit of $23 million. However, Ford expects to break even in the Middle East and Africa region in fiscal 2015.

In the next part of this series, we’ll explore the 2Q15 performance of Ford Credit.


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