- By Graham Griffin
Ford Motor Co. (NYSE:F) released its third-quarter sales numbers for China on Wednesday, which showed 25.4% year-over-year growth. Compared to the second quarter of 2020, sales were up 3.6%.
The company manufactures automobiles under its Ford and Lincoln brands. It has about 14.1% market share in the United States and about 7% share in Europe. Sales in North America and Europe made up 68% and 20% of 2019 auto revenue, respectively.
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Throughout its history, the company has been known for its dominance in the truck and SUV categories. Out of the 551,796 vehicle sales reported by Ford in the third quarter, 503,554 were trucks and SUVs. For the long-standing company, the focus on larger vehicles and the domestic market has not created staggering results overseas.
The sales growth seen in the third quarter in China marks the first time since the fourth quarter of 2016 that the company has grown sales in China. Through its China unit and joint ventures with Changan Ford, JMC and Ford Lio-Ho, the company was able to sell a total of 164,352 vehicles.
Surprisingly, Ford brand SUVs racked up 38,749 vehicles sold in Mainland China according to Ford's press release on Oct. 15. This represented an increase of 72.2% year over year and a 34.8% increase from the second quarter. Alongside the Ford brand vehicles, Lincoln and JMC vehicles sat at double-digit, year-over-year growth.
Traditionally, the larger vehicle format has not performed as well in China and markets outside of the U.S., where compact vehicles have become the norm. Ford China President and CEO Anning Chen said, "Our localization strategy to produce in China world-class Ford and Lincoln vehicles, including the newly launched Ford Explorer, Lincoln Corsair and Lincoln Aviator, has further enhanced our competitiveness in delivering the best products and services that Chinese consumers are looking for."
According to reports, overall vehicle sales grew 16% in September, 12% in August and 16% in July in China. This does not come as a surprise since Ford's U.S. rival, General Motors Co. (NYSE:GM), reportedly delivered 771,400 vehicles during the quarter in China alone and Tesla (NASDAQ:TSLA) also saw record deliveries of 139,300 vehicles.
New for 2021, Ford will be offering the Mustang Mach-E to help expand its product lineup with electric vehicle offerings, which have become extremely popular in China's auto market. Alongside efforts at localization, Ford has planned to revamp its design language to offer vehicles that will be tailored to the needs of Chinese consumers specifically.
As of Oct. 16, Ford stock was trading at $7.70 per share with a market cap of $30.63 billion. According to the GF Value line, shares are trading at fair value after suffering a big hit in valuation earlier this year.
GuruFocus gives the company a financial strength rating of 3 out of 10, a profitability rank of 6 out of 10 and a valuation rank of 7 out of 10. There are four severe warning signs issued for the company, including new long-term debt and poor financial strength. The company's operating margin has declined to -3.86% due in part to domestic year-over-year decreases in sales.
Disclaimer: Author owns no stocks mentioned.
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This article first appeared on GuruFocus.