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Why Don’t Ford’s Rising China Sales Look Promising?

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Ford’s China sales rose in 4Q16

In 4Q16, Ford’s (F) sales volumes in the Asia-Pacific region rose 9% YoY (year-over-year) to 483,000 vehicle units. However, the company’s revenues from the region were flat YoY at $3.4 billion. Despite stronger industry volumes in Asia-Pacific, including China, its revenues remained flat and its profitability dropped. Let’s find out what went wrong.

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Why do these numbers lack promise?

In 4Q16, Ford’s (F) China volumes were at record highs for the company. Some of the new vehicle launches in the Asia-Pacific region are also performing well. These newly launched vehicles include the Taurus, the locally built Edge, as well as the Lincoln MKX and MKZ.

However, strong competition by local Chinese players forced Ford to lower its vehicle prices, which hurt Ford’s 4Q16 revenues and profitability in China. A weaker Chinese yuan also stole the company’s profits in US dollar terms. This is the reason that Ford’s record quarterly sales in China don’t look promising.

Other key markets

In 4Q16, Ford’s (F) revenues from the Middle East and Africa regions fell ~12% YoY to just $0.9 billion due to lower sales volumes. The company’s vehicle sales in the region fell 24% YoY during the quarter. The company attributed these losses to external factors and currency headwinds from the region.

In the last few quarters, the sales of other mainstream automakers (VCR) such as General Motors (GM), Fiat Chrysler Automobiles (FCAU), and Toyota (TM) have also fallen sharply in oil-dependent countries.

In contrast, Ford’s South America revenues improved from $1.2 billion in 3Q15 to $1.4 billion in 4Q16. This represents a YoY revenue increase of about 18%, while the company’s shipments to the region also rose 13% during the quarter.

Ford attributed this sales growth to the high demand of its Ford Ka and Ranger vehicle models. With this, the company’s market share in the region also improved to 8.8% in 4Q16 from 8.4% in 4Q15.

Continue to the next part to learn about Ford’s 4Q16 profitability and margins.

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