Ford's Investment in India is Paying Off

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Ford ( F ) has been successfully solidifying its position in the Indian car market over the last  year when it launched Ford Figo. Booming sales of the Ford Figo helped Ford India post a 184% growth in sales in 2010. This helped Ford compete globally with automakers like GM ( GM ), Daimler (ETR:DAI), Honda ( HMC ), Toyota ( TM ), Maruti Suzuki (BOM:532500), Hyundai (SEO:005380) and others. We believe that Ford's transformed position in India and its aggressive growth plans can provide significant upside potential to Ford's stock value.

We have a price estimate of $20.59 , which is around 42% above the current market price.

Ford's Bumper Year in India

Ford has experienced a bumper year in India with overall sales reaching 83,887 units during 2010 against 29,488 units in 2009. Ford Figo, which has sales exceeding 76,000 units since its launch in March 2010, contributed significantly to this sales growth. Ford's rapid growth of 2010 has continued in 2011 with Ford India reporting its sales tripling in February 2011 compared to the same time last year.

The Indian car market is poised to grow strongly in the coming years, and we believe that Ford has positioned itself very favorably in the market to capitalize on this growth. Ford's market share in India is still around 2.6%, thus providing it with substantial room for improvement.

Investing in Growth

Ford is focusing on expansion with plans to invest approximately INR 50 billion (USD 1.1 billion) into a new production facility in India. Ford recently approached the Indian government to seek 500 acres of land for this facility. Additionally, Ford India has also been expanding its sales and service network across the country. The company's dealer network has already increased to more than 170 outlets in 100 cities across India.

We believe that this will help Ford meet the growing demand in the Indian car market and drive its international car market share.

Ford to Expand its Car Portfolio in India

Ford is hoping to build on its success of 2010 and is planning to launch the all new Fiesta this year. Ford's car launch plan includes a series of eight new global products that Ford plans to introduce in India by the middle of this decade. This will help Ford's overall positioning in auto market in India as it plans to have products in each consumer segment. Ford hopes to capitalize on Figo's success and push its revamped portfolio of products to gain maximum mileage from the rapidly expanding Indian automotive market.

Upside from Faster International Growth

Increasing Ford vehicle sales in India could cause Ford's market share to grow at a faster pace than what we had projected. In a scenario where Ford International market share grows by 0.2 percentage points more than our current growth projection would imply a Trefis price of $22 - a further 10% upside from our current price estimate. You can modify the chart above to make your own forecast.

See our full estimates for Ford.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: F , GM , HMC , TM

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