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Ford Rolls Out New SUV in India - Analyst Blog

Posted
6/24/2013 6:30:00 PM
By: Zacks.com
Referenced Stocks:F;GM;TM;TTM

Ford Motor Co. ( F ) revealed that it has started shipping locally manufactured EcoSport compact sports utility vehicle (SUV) in India in order to tap the growing market for mini-SUV in the country. Like China, mini-SUVs are becoming more and more popular in India due to traffic congestion, lack of parking space and uneven roads.

In China, IHS Automotive projected that demand for small SUVs will more than double to over 207,000 units in 2013. In India, the automotive think tank anticipates mini-SUV sales to grow manifold from only 6,140 vehicles in 2012 to more than 126,000 units in 2015.

The Detroit-based automaker plans to export the EcoSport from its Chennai plant in South India to Europe later this year. According to the company's chief executive, Alan Mulally, the company is on track to build more vehicles using global platforms or chassis, in order to reduce costs and hasten product development.

In Oct last year, Ford had revealed that it will expand sales network in India as part of its major expansion plan in the emerging countries. It will increase the number of outlets to 500 by 2015 from 230 currently in the country.

In Sept of the same year, Ford had announced plans to boost exports of its engine production from India by shipping them for the first time to Europe. The automaker exports 40% of its Indian-made engines and 25% of its Indian-made cars to 35 countries.

Ford's plan to rev up Indian exports is in line with its capacity expansion programs in the country. The company expects to manufacture 450,000 cars and 600,000 engines in India by 2015.

The company has already pumped in $2 billion to build manufacturing facilities in India. However, it is still lagging behind Hyundai Motor and Maruti Suzuki India Ltd, which occupy the lion's share in the Indian car market.

Ford is pursuing a major expansion plan in the emerging countries, including Argentina, Brazil, China, India and Thailand. Mulally expects that Asia-Pacific will account for 40% of its vehicle sales in four to five years. The company also anticipates Asian sales volumes to double and account for a third of its global sales by 2020.

According to Joe Hinrichs, the president of Ford's Asia Pacific and Africa region, India will be the third largest market after U.S. and China by the end of the decade. Currently, Ford shares the Indian market with other leading automakers such as General Motors Co. ( GM ), Toyota Motor Corp. ( TM ) and Tata Motors ( TTM ).

Ford, a Zacks Rank #3 (Hold) stock, posted an increase of 4.1% in earnings to $1.6 billion and 5.1% in earnings per share to 41 cents in the first quarter of 2013, beating the Zacks Consensus Estimate by 3 cents. Revenues improved 10.5% to $35.8 billion, exceeding the Zacks Consensus Estimate of $32.8 billion.

The improvement in revenues and earnings was mainly attributable to Ford's strong performance in North America and Asia Pacific Africa. The company's results were disappointing in South America due to unfavorable exchange rate as well as in Europe due to the sluggish economy.



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