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We hear about China's booming manufacturing and production economy almost every day in the news. It is strange, therefore, to consider that many Chinese households are yet to even own their first car. As the country has experienced high levels of real growth over recent years, thousands of its citizens still live below the poverty line. But as these finally begin to improve, demand in the motor industry is picking up. Car ownership is set to soar in China over the next decade, and international motoring companies are keen to gain as much market share as possible.

Ford Motor Company (NYSE:F), the latest company to announce its strategy to meet growing demand, pledged $600 million of funding to investment in Chinese factory expansion back in May - and it seems this was a good move, with sales up 8% in the country last month. The capital increase will allow Ford to produce an extra 350,000 cars per year, helping it to meet growing demand in the Chinese market. The expansion will be completed with partner firm Changan Ford Mazda Automobile, which produces the Focus Compact, Fiesta Subcompact and the S-Max small van.

Currently, Ford has a relatively small market presence in China; its sales fell to under 72,000 units in January and February this year, down 16 per cent from a year ago. This decrease occurred despite a general expansion of the automobile industry; competitor General Motors (NYSE:GM) experienced rises in sales of 7.7 per cent to over 487,000 units, and overall sales were higher in the retail market than passengers expected. Ford claims its sales slowdown was due to an overall fall in economic activity in China, as the country experiences a slight dip in growth. It also blames sharply increasing fuel prices.

Whilst these two factors no doubt have been at play, in my opinion sales would have fell (perhaps to a lesser extent) even without them. But this could be set to change if Ford manages to penetrate the Chinese market more deeply following its factory expansion investment. The company's current strategy is the target first time vehicle buyers, and I think this will work effectively, as long as Ford can use its worldwide reputation to fend off strong competition. If sales continue to rise, we will likely see a stellar performance of the stock in the latter half of this year - even if dividends do take a temporary hit due to high capital investment.

One of Ford's largest competitors in the Chinese market is automobile giant General Motors, which is the world's largest vehicle supplier and the company with the largest foreign presence in China. The company outperformed Ford in sales increases last month with an impressive boost of 21%, mainly due to the introduction of the GM Microvan. But with Wednesday's news that the company's stock had fallen to below 20 dollars due to economic instability in Europe, General Motors may lay off expansion into China temporarily to sort out problems closer to home, giving Ford room to breathe.

The world's second largest automobile supplier, after General Motors, is Toyota (NYSE:TM). Toyota has also seen increasing car sales in China over the past year, shaking off the effects of the Japanese earthquake disaster that occurred in March last year, damaging some of the company's production sites. It too will be looking to attract first time buyers to its mid-range models. Last year, Toyota sold just over 880,000 vehicles in China, a 4.4 per cent increase compared to sales in 2010. This year, it aims to sell around one million vehicles, an ambitious target that relies heavily on boosted demand.

I think the news that Ford is stepping up its game could make this already difficult company goal even more challenging; Toyota's share price could face a steady decline if its sales performance isn't stellar throughout 2012. The stock is currently valued at 5.6 times earnings, which compared to Ford's share - valued at just 6.2 times earnings - is respectable. Given that Toyota failed to meet the expectations of analysts regarding sales increases last year (probably partially due to the Japan earthquake crisis), its prospects don't look great for the year ahead.

Volkswagen (OTCQX:VLKAY) and BMW are further international competitors that are hoping to increase sales in China over the coming year. I think all five automobile superpowers could gain a substantial portion of the new market share, and expect General Motors will lead the way. It already has a large market presence in China that it can build upon, in addition to popular models on the market suitable for first time buyers. But these gains could be smaller than previously anticipated if news of a sustained economic slowdown in China continues.

China's state-backed Automobile Association warned towards the end of March that a drop in demand could be imminent, as official economic figures show national output growth has slowed. The government has revised growth targets down to 7.5 per cent, from the 8 per cent that has been maintained over the past few years. Does this news spell trouble for the auto industry?

I think it is too soon to tell. China has experienced dips in growth before, and managed to pull back quickly to previous high levels - we will most likely see this happen again, as the fire behind Chinese growth (high export demand at a low fixed exchange rate) continues to burn. But it is no lie that the incredible growth levels seen in China in recent times can't go on forever.

I think the time is now to invest in Ford. The company has been increasing its worldwide sales gradually over the past year, yet its share price has yet to reflect this. On the other hand, it must also be remembered that although the company's international performance is strong, home sales are a different story. Blaming falling consumer confidence, annual sales figures have been revised to an all-year low of 14 million in the US.

Nevertheless, in a quickly globalizing world, concentrating on penetrating growing national markets is probably the best long-term strategy. I think Ford's stock rise above $13 by 2013, and even higher in the long run if Ford isn't put off by the overwhelming worldwide presence of its rival, General Motors.

Source: Ride Ford $3 Higher By 2013