By Sam Quest
Emerging markets seem to be the next stage for automakers; Ford Motor Company makes inroads in the African and Middle Eastern region with 25 new models, including the Mustang
Ford Motor Company (NYSE:F) plans to introduce 25 new models in Africa and the Middle East by 2016. The automaker expects a surge in sales, powered by a 31% increase in the number of people driving cars, totaling 1.7 million, by 2023. The company estimates that Africa, alone, may see the number of drivers grow to 840 million people – 55% –by 2023.
The second-largest automaker in the U.S. intends to capitalize on the rising numbers of young, affluent consumers in the Middle East and African markets. The regions accounted for 5.9% of Ford’s last-quarter communication systems, touch screen connectivity, and fuel-efficient turbo charged engines’ worldwide pretax profit. The markets also provide a diverse customer base for the company, with the car market expected to grow 40% by the end of the decade to 5.5 million vehicles. This attunes well to Ford’s diverse product portfolio.
The Ford Mustang is set to be Ford’s frontrunner, along with models like the Fusion and Focus. The company is also introducing new technology, including voice-activation.
Ford introduced five new models in South Africa last year, which drove sales up 40% year-over-year (YoY). Currently, it commands an 11.5% share of the South African market, trailing Toyota Motor Corp. (ADR) (NYSE:TM) and Volkswagen AG (ADR) (OTCPK:VLKAY). Annual industry-wide sales in the country are approximately 600,000 units. Ford ranks in at number six – in sales – among South African automakers.
In 2013, sales from the Asia Pacific and African region amounted to 20.9% of total revenues. Also, 5.9% of the $7 billion pretax-profit of the company came from the same region.
The African region poses a challenge for automakers, particularly because of labor protests and strikes. The most recent one has been persisting for the past two weeks and has halted production at Ford and other manufacturers. However, the newer models that Ford plans on introducing will be imported.
Nonetheless, emerging markets hold great potential for the company to expand its business. The company’s stock has returned 16.49% year-to-date (YTD) compared to the S&P 500, which has yielded 7.62% YTD.
Disclosure: No positions