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Ford's (F) Q2 China Sales Snap 3-Year Slump, Rise 3% Y/Y

Ford’s F vehicle sales in China increased 3% year over year to 158,589 units during the second quarter of 2020. This also marks a 78.7% rise from the prior quarter. The rise in second-quarter sales was primarily driven by robust demand amid the lifting of coronavirus-induced lockdown restrictions in the country and a strong product mix. Importantly, this marked the first time in nearly three years that the U.S. auto giant registered a rise in quarterly sales in China.

Ford currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Highlights From Ford’s Q2 China Sales

A strong vehicle lineup including the all-new Ford Escape and Lincoln Corsair enhanced the product mix. High demand of commercial and luxury vehicles helped it in bolstering sales volumes. Sales of Transit commercial vehicles registered double-digit growth of 60.9% year over year to 15,007 units. Lincoln luxury vehicles rose 12% year over year to 13,896 units. Ford brand SUV sales grew 82.1% from the prior quarter to 30,462 units, mainly driven by Escape and Explorer models.

Ford Lio-Ho sold 5,223 vehicles in Taiwan in the second quarter of 2020, up 1.8% and 7% year over year and quarter over quarter, respectively. All-new Ford Kuga, launched in mid-June, received nearly 2,000 orders.

JMC (Jiangling Motors Corporation), in which Ford owns a stake, sold 80,224 vehicles in the quarter, up 33.8% year over year. Sales volume doubled from the prior quarter. JMC sells Ford-branded SUVs, crossovers and vans, as well as namesake commercial vehicles.

Are Green Shoots of Recovery Emerging?

Ford has a strong presence in China, which happens to be its second-largest market. However, the company has been witnessing sagging sales in the country amid lackluster Chinese economy and the long-standing U.S.-Sino trade tiff. Sales in China dropped 26.1% in 2019, following a fall of 37% and 6% in 2018 and 2017, respectively. Sales were also believed to be hurt by an aging model lineup, and strained relationships with its joint venture partners as well as dealers.

Ever since the business began suffering in late 2017, Ford has been making moves to revive sales in China. The company aimed at strengthening product line-up, with more customer-centric products and focus on customer experiences, in order to counter macro-economic headwinds and improve profitability. The automaker plans to launch more than 30 models in China over the next three years, of which more than a third will be electric vehicles.

Ford’s efforts to bolster sales in China — the world’s biggest auto market — are indeed signaling early signs of recovery. However, it’s still too soon to say if the firm will be able to maintain the same. Meanwhile, it should be noted that Ford’s main rival General Motors’ GM second-quarter sales in China declined 5.3% year over year to 713,600 units.

Although Ford intends to build sales momentum in China, it indeed faces a tough competition. Apart from established carmakers like Toyota, Volkswagen and others, the company has to compete with local players like NIO Inc. NIO, BYD Company Limited and Xpeng. Tesla’s TSLA expansion in China with the Shanghai Gigafactory will further heat up competition.

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