Ford Motor Company (NYSE:F) competes with automotive companies like Toyota (NYSE:TM), Honda (NYSE:HMC), Nissan, Volkswagen, and a host of other regional players in emerging markets such as India and China. Ford derives more value from international markets than from the North American market.
We estimate that Ford Cars & Trucks International, comprising Asia-Pacific, South America and Africa markets, constitutes 40% of the $12.92 Trefis price estimate for Ford’s stock. Ford’s share in international markets was around 5% in 2009. We project this figure will reach 6% by the end of the Trefis forecast period.
According to a recent Wall Street Journal article, Ford sold more vehicles in India in the last six months than in all of 2009, driven by strong demand for its new Figo car. We believe that if this trend continues in the Asia-Pacific region, there could be a 3% upside to Ford’s stock. Our analysis follows.
Potential for higher vehicle sales in Asia-Pacific
In 2009, Ford had a 2% share in the Asia-Pacific market. Based on six month figures for 2010, we estimate that Ford can achieve a market share of 2.5% in the Indian automotive market. If this trend holds true for the overall Asia-Pacific market, we believe that Ford’s Asia-Pacific market share could reach 5.23%. This would likely yield a 3% upside for Ford’s stock price. You can modify our forecast to see how changing international market share impacts Ford’s share value.
Reasons for Ford’s strong performance in India
Here are some of the factors that could help boost Ford’s India market share.
1. Capitalizing on India’s booming auto sales: The Wall Street Journal reports that due to the success of Figo, Ford sold 32,755 cars and SUVs in the first six months of 2010, more than double the number of vehicles sold in 2009. India is the third largest Asian automotive market after China and Japan. Indian consumers are expected to buy about three million light vehicles (excluding trucks) in 2010.
2. Ford’s first mover advantage in India: We don’t see Ford doing anything different in vehicle pricing, sales and marketing compared to other automotive players. Its main advantage over competitors like Maruti Suzuki and Hyundai is that it was the first manufacturer to enter the small car market. Toyota has not yet annnounced plans to sell a small car in the Indian market, while Nissan now plans to launch its compact car Micra.yet to come out
3. Expanding plants and dealer network: Ford is expanding its plant in Chennai, India, by adding a second shift of workers. It also plans to expand its India dealer network.
Ford should do well in India in the short run. But with the entry of global automotive giants such as Toyota, Volkswagen, GM and Nissan in the small car segment, it will be interesting to see if Ford can maintain its growth momentum in the long run.
Disclosure: No positions