Ford Motor Co. recently reported its highest net income in more than 10 years. We currently estimate Ford's International operations contribute 35% to its stock price – similar to its North American operations that contribute 35.6% if we include both cars and trucks together. In 2010, with $7.4 billion of automotive sales, Ford's Asia Pacific & Africa operations contributed 6.2% to its total automotive sales of $119 billion (up 0.9% from its contribution in 2009). We expect that international operations will become increasingly more valuable for Ford. Ford competes globally with automakers like BMW, GM, Daimler, Audi, Honda, Toyota and others.
We have a price estimate of $20.59, which is around 37% above the current market price.
In this third article of a series, (See Trefis Ford articles) we will take a closer look at Asia Pacific, especially the following 12 countries: Australia, China, Japan, India, Indonesia, Malaysia, New Zealand, Philippines, South Africa, Taiwan, Thailand and Vietnam, which are the most important markets for Ford in these regions.
Asia Pacific & Africa Markets
The Asia Pacific & Africa regions include the largest and fastest growing automotive market in the world. Within the above-mentioned 12 countries in this region, total automotive industry sales have been growing by an average rate of 13.3% every year since 2006, and reached 30.7 million units in 2010. Between 2009 and 2010, the industry sales in these markets grew by more than 25%.
China's total automotive industry sales in 2010 stood at approximately 18.3 million units, up 30% from its 2009 levels. Total automotive industry sales in 2010 were 3.1 million units in India – up 35.5% from 2009, 1 million units in Australia – up 10.5% from 2009, 426,000 units in South Africa – up 20.3% from 2009, and 328,000 units in Taiwan – up 11.3% from 2009.
Ford's Share of Asia Pacific & Africa Markets
Ford's overall market share in the above mentioned 12 countries of this region is relatively small compared to other regions and increased by 0.1% in 2010 and reached 2.4%.
India witnessed combined car and truck share for Ford?brand vehicles almost doubling from its 2009 levels and reaching 2.6% in 2010. During the same period, Ford's vehicle market share in Australia decreased by 1.1% to reach 9.2%, and in South Africa increased by 0.1% to reach 7.7%. Ford's market share in China stood at 2.5% and in Taiwan stood at 6.1% in 2010.
Small, Ultra-Affordable Passenger Cars to Drive Growth
Small cars account for 60% of Asia Pacific & Africa industry sales volume and are anticipated to continue to benefit from government fiscal policy. Ford Figo's launch in India has demonstrated Ford's ability to compete effectively in this market segment. We believe that going forward Ford has significant opportunities to capture in this segment and improve its market share.
Lowering of Import Restriction to Intensify Competition
Ford will face increased competition in the passenger car segment as many countries continue to relax their import restrictions. Duty reductions have enabled other global car manufacturers to offer their own low priced models, such as Toyota Etios, in these markets.
China and India to Continue to Drive Growth in the Long Term
China's and India's industry sales volume has almost tripled between 2005 and 2010. Moreover, the driving age population with disposable income for vehicle purchases is expected to grow from about 700 million to more than 1.1 billion in China by 2020, and from about 165 million to more than 500 million in India over the same period. We believe that this will facilitate continued rapid and substantial growth in these markets over the long-term.
How We Could See Further 10% Upside to Our Estimates
We believe that Asia Pacific & Africa region offer enough opportunities for Ford to increase its market share. We believe that if Ford's international market share growth is 0.2% more than our current expectations over our forecast horizon, then this will imply nearly 10% upside from our current price estimate for Ford implying a potential 45% total return.
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