1 Reason Ford Motor Company's Surge in China Will Continue

Ford Motor Company 's aggressive expansion strategy in China has paid off with surging sales this year and the automaker's success in the world's largest automotive market will be vital to returning more value to shareholders over the next decade.

Despite the surging sales -- Ford's year-to-date sales are up 30% through August -- last month's gain of 9% was Ford's worst monthly gain in China this year. The monthly performance offered a quick reminder to Ford investors that continuing to increase sales at such a rapid pace will be difficult.

Let's take a look at where Ford stands in China currently and which fast-growing segment could help the automaker keep ahead of its steep year-over-year sales comparisons.

Where does Ford stand in China?

Last month Ford China's sales topped 77,000 wholesale vehicles, a 9% gain, and its year-to-date sales hit 717,537 for a 30% increase over the same time frame in 2013. As you can see in the graph below, the next five months will present steep year-over-year comparisons and Ford investors should be pleased with sales gains around 10%.

But where exactly does Ford stand in the overall market? Here's a look at some competing foreign automakers' sales in China through August, with the exception of Volkswagen, which has yet to release August data.

Graph by author. Data source: Ford Motor Company.

Volkswagen Group: 2.10 million wholesale units, 17.2% increase YOY (figures only through July)

General Motors: 2.2 million wholesale units, 11.1% increase YOY (likely trails VW once the latter releases August data)

Nissan: 785,400 wholesale units, 9.4% increase YOY

Ford: 717,537 wholesale units, 30% increase YOY

Toyota: 619,200 wholesale units, 9.7% increase YOY

Honda: 445,473 wholesale units, 5.2% increase YOY

While it's clear that Volkswagen Group and General Motors have largely separated themselves from other foreign automakers as the dominant players in China, Ford is making a strong push to becoming the third-largest foreign automaker, sooner rather than later.

In fact, Ford happens to find itself with the right products at the right time to take advantage of a surging vehicle segment in China.

Right place, right time

A decade ago in the United States, Detroit automakers were known for producing gas-guzzling, road-hogging SUVs and full-size trucks -- beyond those two segments, consumers typically ignored Ford, GM, and Chrysler. Fast-forward to today, and Chinese consumers are going through the same SUV craze, and they can't get their hands on enough of the utility vehicles.

As SUVs continue to replace midsize sedans as the latest status symbol in China, sales of Ford's Kuga (Escape) and EcoSport rose 39% and 29%, respectively, in August, compared to last year. Even more impressive than last month's results: For those two crossover nameplates, their respective sales increases for the year through July were a staggering 63% and 82%, respectively, compared to the previous year.

Furthermore, as Ford continues with its aggressive plan to launch 15 new vehicles in China by 2015, it will bring out more SUV/crossover products, which include the Everest in mid-2015.

Ford's Everest concept will hit the roads in China mid-2015. Source: Ford Motor Company.

"It's a concept that offers beautiful design, premium refinement, and rugged capabilities in equal measure. A vehicle like the Ford Everest Concept would be a great addition to our growing stable of SUVs, helping us to further strengthen our position in the rapidly growing utility segment," said John Lawler, chairman and CEO of Ford China, in a press release.

Bottom line

Make no mistake: Despite challenging year-over-year sales comparisons, Ford is making the moves to secure double-digit sales gains over the next year, and perhaps many years beyond. In addition to the automaker's extremely popular passenger cars -- the Focus remains China's top-selling nameplate through July -- its knowledge and experience designing and producing successful SUVs/crossovers will give Ford an edge over Nissan and other leading Japanese automakers in a rapidly growing and key Chinese segment.

As sales of SUVs, which typically haul in juicier margins and higher average transaction prices, accelerate in China, it will enable the company to boost its profits sooner rather than later. All these factors point to Ford's aggressive push to become the third-largest foreign automaker in China as a very likely development over the next couple of years -- which is great news for shareholders.

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The article 1 Reason Ford Motor Company's Surge in China Will Continue originally appeared on

Daniel Miller owns shares of Ford and General Motors. The Motley Fool recommends Ford, General Motors, and Tesla Motors. The Motley Fool owns shares of Ford and Tesla Motors. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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

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