Another Great Month for Ford in China

Ford (NYS: F) continued to make hay as its rivals struggled in China in October. The Blue Oval's Chinese sales were up 48% over year-ago totals in October, the second consecutive month in which Ford's year-over-year gains topped 40%.

Ford's sales are being helped by a number of factors in China, but perhaps the most helpful at the moment are the challenges being faced by Japanese automakers in the country.

Japan's giants continue to struggle in China
The major Japanese automakers -- particularly Toyota (NYS: TM) , Honda (NYS: HMC) , and Nissan (NASDAQOTH: NSANY) -- have seen their sales in China fall sharply in the last two months, with buyers turning to American, German, and Korean brands in big numbers. A wave of anti-Japanese sentiment following a dispute between the Chinese and Japanese governments over a group of islands has led to a sharp drop in sales of many Japanese companies' products -- particularly cars.

Toyota had been doing well in China, but its sales fell 49% in September and 44% in October over the year-ago months. Toyota has cut its Chinese production by roughly half and expects its production and sales to be down until next summer, according to reports.

The others aren't faring any better. Honda cut its full-year-profit forecast significantly on China concerns after a 41% drop in September. Nissan followed suit with its own profit warnings after posting a 35% drop in September and a 41% drop in October. And Mazda (NASDAQOTH: MZDAF), a relatively small player in China, saw its sales fall 45% last month.

Not all of those buyers have turned to Ford, of course. But quite a few have, thanks in part to one of the Blue Oval's most competitive cars: the Focus.

Focus leads Ford to another record month
As good as September was for Ford in China, October was even better. Ford sold just over 60,000 vehicles in China in October, an all-time record, thanks to the continuing strength of the Focus family of products.

Yes, I said "family." Ford sells two different cars called "Focus" in China: the last-generation car, called "Classic Focus," and the familiar current car, called "New Focus" and positioned as a premium product line. Sales of the two together make up more than half of Ford's total sales in China, as the company gears up to roll out a slew of new products in the country in the next few years.

Ford plans to launch 15 new products in China by 2015 in a bid to increase its sales to over a million vehicles a year in the Middle Kingdom. That will be a big step forward for Ford, a latecomer to the Chinese party, but it's still not in the league of China's automotive heavyweights, General Motors (NYS: GM) and Volkswagen (NASDAQOTH: VLKAY), both of which have already sold more than 2 million vehicles in China so far this year.

GM and VW battle for Chinese supremacy
GM and VW are running neck-and-neck for the No. 1 position in the Chinese auto market in 2012. While GM had a slim lead through September, Volkswagen managed to outsell the General in the third quarter -- thanks in part to big gains from the Japanese kerfuffle.

GM had a solid month in China in October, with sales up a bit over 14%. That's better than its tiny gain in September, but GM still looks to be the one global automaker that is having trouble taking advantage of the Japanese brands' troubles in China. GM's Chevy Cruze continues to be one of China's best-sellers, but it's under increasing pressure from non-Japanese rivals like the Focus - and from Hyundai (NASDAQOTH: HYMTF), which posted a 37% gain in October.

That won't help GM in the China sales race. Its key competitor is surging: VW's sales were up 24% in September, and early signs suggest that the company may have had an even better month in October. Many of those sales have been high-margin Audis, powering VW to big profits in the most recent quarter.

The upshot: Ford is gaining ground
For Ford, the Japanese companies' struggles in China have created a welcome opportunity to gain sales ground a bit ahead of its planned schedule. Ford has made a big investment in the region -- over $5 billion to date -- and just appointed well-regarded executive John Lawler as CEO of its Chinese operation.

Ford's plan all along has been to win buyers with the strength of its global product line. If the Japanese troubles mean that more buyers are willing to give those products a look now, so much the better for the Blue Oval.

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