According to a PWC forecast, the total number of cars to be assembled globally is expected to reach 83 million in 2013, which is a 5.1% increase from 2012. Asian countries like China and India have a major contribution to the global automobile industry on the basis of their growing demand of small and fuel-efficient cars. Additionally, the U.S. market is also expecting an uptrend in the sales of cars to 15.3 million units in 2013, up from 14.4 million units in 2012. I have analyzed three stocks from the automobile industry because of their strategies to attain highest market share and grow their businesses.
China being the main focus
Ford Motor (F) "Asia Pacific Africa'' region posted market share of 3.6% in the first quarter of 2013, which is a 20% year-over-year increase. Ford observed a 49% upsurge in the first quarter of 2013 for sales in China when compared to the last quarter of 2012. The rise was mainly driven by the ''Focus'' and the ''Kuga,' its new entrants in the Chinese market. Kuga, being a small SUV, is much more popular than the Focus, as the demand for small SUV cars is rising in China. Looking at this upsurge in sales, the company is planning to launch 15 new vehicles by 2015. Ford will also make major investments to open seven new manufacturing plants in China with a production capacity of 1.2 million vehicles. The company is expecting gross profit of $8 billion in the fiscal year of 2013 on the basis of growing demand for Ford cars in China.
Ford's credit segment contributed $507 million to its $2.1 billion gross profit for the first quarter of 2013, which is a $93 million quarter-over-quarter increase. The company earns around $200 million per month in revenue by offering loans on one million vehicles every year. It is expecting that the Federal Government will possibly keep the interest rates low until late 2014. With this expectation, the industry should see an uptrend in total sales to 15.2 million cars in 2013, which was 14.5 million in 2010, in the U.S. The company has a market share of 15.9% in the U.S., which eventually will result in higher revenue.
Both markets having future growth prospects
Honda Motor (HMC) sold 4.1 million vehicles in the U.S., which is 29% more than the previous year. These sales contributed to its total net income of $3.7 billion (367 billion yen) for the fiscal year ending in March 2013. The sales in North America account for 40% of the company's total sales. Honda is anticipating a profit of $5.7 billion (580 billion yen) for the fiscal year ending in March 2014 on the basis of the sales in the U.S. To boost its sales numbers in the U.S., the company is focusing on its Acura brand by investing $1 billion to launch new variants such as the RLX, which is a hybrid variant and has an "all-wheel drive'' feature. Moreover, Honda is the first car manufacturer to commercialize hybrid cars in the U.S., but the product was not a success against Toyota's Prius. So to gain momentum in the U.S. hybrid car segment, the company is planning to launch ''FCX Clarity'', a low-cost hybrid model, in 2015 to compete against Toyota's Prius.
Honda posted global motorcycle unit sales of 15.4 million units in the fourth quarter of 2013, which were 15 million units in the previous quarter. Asia contributed 13 million units to the global sales of the company. The huge contribution of the Asian sales was mainly driven by its sales in India, where Honda has around 20% market share. The company has a considerable amount of market share in the Indian market and is expecting a growth in sales by 43% to 3.93 million units in 2013-2014 in India due to the growing demand of motorcycles. Honda is planning to increase its production capacity of motorcycles in India from 2.2 million units in 2011 to 4 million units by the end of 2013. It is also concentrating on gaining highest market share in India by launching new products in every quarter until 2014, like the ''CBR400R'', which is likely to be launched in July 2013, and the ''PCX150'', an expected launch in December 2013. With the anticipation of sales growth in India, the company is expecting its global motorcycle sales to reach 17.4 million units by 2014.
Joint venture and the markets will affect the top line
Toyota Motor (TM) sold 2.49 million units in North America in the fiscal year ending in March 2013, which was approximately a 600,000 unit rise in comparison to fiscal year 2012. The company has 15.1% of market share in the U.S., which drove the uptrend in sales. Sales in the U.S. contribute to around 90% of the total sales for Toyota in North America. The total number of cars sold in the U.S. was 14.5 million in 2012 and the number is expected to reach 15.2 million by the end of 2013. With the increase in number of cars sold in the U.S., the company is planning to launch new versions of the "Yaris Trend'' and "Auris Touring Sports'' in 2013 to enhance their market share. Moreover, the company is now looking forward to achieve target of selling 8.75 million cars globally by the end of the fiscal year, which began in April 2013.
Toyota has recently announced a joint venture with Panasonic, a Japanese electronics manufacturer, for nickel-metal hydride batteries for its "Prius.'. The company is planning to build a new production line of lithium-ion batteries by spending $194 million (20 billion Yen). This new production line will have an output capacity of 200,000 units every year. The lithium-ion battery will help Toyota to make more fuel-efficient hybrid cars. With the higher demand of hybrid cars in the U.S., it is expecting to sell 250,000 units there by the end of 2013. Toyota expects to sell 2.07 million hybrid cars globally. With the anticipation of a rise in sales, the company is expecting a total net income of $13.7 billion in the fiscal year ending in March 2014.
Gear up for growth
Focusing on the Chinese market, Ford is performing well and is expected to continue growing in terms of revenue in the upcoming years. The credit segment is anticipated to make a higher contribution to the total profit.
With a growing number of cars sold in the U.S., Honda is looking forward to attain the majority of market share. While the motorcycle segment in Asia will bring top-line growth to the company.
Toyota is also another player to gain market share in the U.S. and is trying to be the market leader by launching new models and making new options available. The joint venture with Panasonic will also help the company to boost revenue in the years to come in its hybrid cars segment.
I recommend buy for all these stocks.