Ford Raises Stake in Chinese Joint Venture - Analyst Blog
April 19 2013 - 9:40AM
Zacks
Ford Motor Co. (F) announced that has raised
its stake in Chinese light commercial vehicles joint venture,
Jiangling Motors Corp., to 31.5% from 30.0%. The Detroit-based
automaker purchased 13.0 million Hong Kong dollar-denominated
B-shares of Jiangling Motors, which manufactures JMC light trucks,
SUVs, and Ford Transit van in China.
After the purchase, Ford’s stake in the joint venture went up to
$705 million. The company is also looking forward to raise its
stake in the joint venture further by 0.5% to 32.0% – the maximum
limit allowed by the securities regulator – within a year.
Ford continues to post robust sales growth in China. Last month,
the automaker posted a staggering 65% rise in sales to 81,387
vehicles.
Considering the first quarter of the year, Ford’s sales went up 54%
to 186,000 vehicles. In the same period, Jiangling sold 56,420
vehicles, up 7.1% from the year-ago period.
Ford’s archrival, General Motors Company (GM) and
its Chinese joint venture partners sold 290,538 vehicles in the
month, up 12.6% from March 2012. It was the company’s
second-highest monthly sales ever recorded in China.
In the first quarter of the year, GM’s sales increased 9.6% to
816,373 vehicles, overtaking Volkswagen AG
(VLKAY), led by burgeoning demand for its Buick lineups. Volkswagen
reported a 21% rise in sales to 770,000 vehicles in the same
period.
Japanese automakers continued to be the losers due to the political
conflict between Beijing and Tokyo over disputed islands in the
East China Sea. Sales of Japanese brands, including Toyota
Motor Corp. (TM), fell 17.8% during the month.
Overall passenger vehicle sales in China slowed down in March
compared to the first two months of the year, mainly due to the
stricter regulation imposed by the government on vehicle ownership
aimed at controlling increasing pollution and traffic congestion in
the country. According to the China Association of Automobile
Manufacturers (CAAM), passenger vehicle (cars, multipurpose and
sport- utility vehicles) sales rose 13.3% to 1.59 million units in
March compared with a 19.5% increase in Jan–Feb this year.
Passenger vehicle sales grew 17.2% to 4.42 million units in the
first quarter of the year, which is higher than 7.1% growth
registered in 2012. Thanks to the steep discounts that kept
passenger vehicle sales at a higher level in the world’s biggest
auto market. Total vehicle (passenger vehicles, buses and trucks)
sales grew 13.2% to 5.4 million units in the first three months of
the year compared with 4.3% to 19.3 million vehicles in 2012.
Ford has embarked upon an aggressive expansion plan in China that
includes plans to triple its lineup in China by introducing 15
models, including the Kuga small sport utility vehicle by 2015.
Currently, the company sells seven models in the country.
In order to develop the new models, Ford will build new plants
raising its capital spending to about $6 billion annually by
mid-decade from $4.3 billion in 2011. In order to keep pace with
the expansion, Ford also plans to double its workforce by hiring
1,200 employees by 2015.
Ford anticipates global sales to expand by 50% to 8 million
vehicles by 2015 given the potential growth in Asia, mainly China
and India; and rising demand for small cars. The automaker
anticipates small cars to account for 55% of the total sales by
2020 compared with 48% presently. One third of the small car sales
are expected to come from Asia.
Currently, shares of Ford retain a Zacks Rank #3 (Hold).
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