Ford CEO Alan Mulally has reason to be happy: sales are up in China, unlike many of Ford's competitors.
Late to market, Ford Motor Co. has been racing to catch up with its competitors in China. The maker got a solid boost there last month, sales surging by 53% year-over-year.
But Ford is one of the few makers to be celebrating. After more than a decade of massive growth that has transformed China into the world’s largest automotive market, demand has been sputtering in recent months, and January sales clearly reflected the overall economic slowdown plaguing the country.
That said, even at a mere 7% increase compared to January 2013, Chinese car sales still managed to maintain at least some momentum – in sharp contrast to the U.S. where demand last month showed a worrisome setback after the booming pace set in 2013.
All told, Chinese consumers purchased 1.85 million vehicles during January 2014, the first time monthly sales surged past the 1.8 million mark, according to the China Association of Automobile Manufacturers.
Even so, carmakers from around the world are nervously watching what is happening in the once-booming market where year-over-year growth has more than occasionally approached a triple-digit pace since the beginning of the 21st Century.
All in all, January’s “figures are pretty good,” Zhang Xin, an industry analyst for Guotai Jun’an Securities, told the Associated Press. “Sales probably were boosted by rumors of sales restrictions in some big cities. The longer the rumors last, the better sales will be.”
A number of key cities, including the capital of Beijing and the economic center of Shanghai, already have strict rules in place limiting the number of new vehicles that can be registered each month – an effort to deal with both worsening traffic congestion and endemic smog problems. Beijing is reducing its vehicle quota and a number of other cities are expected to take similar steps.
Auto industry officials, however, are hoping that China’s car buying simply shifts from the well-established market along the Pacific Coast to inland cities where consumers are just beginning to feel the benefits of the country’s economic boom. There are more than 200 cities in China with populations of over 1 million and only a small percentage have yet become saturated with cars.
The bigger concern, then, is the growing weakness of the Chinese economy overall. Despite still-booming exports, the country has been showing worsening signs of an internal economic slowdown, according to various analysts.
Industry analysts warn that will translate into slowing demand – though car sales are expected to continue to grow. But December’s 17% increase translated into a mere 7% last month, and for the year as a whole, the more optimistic analysts are predicting the pace will rise only to between 7% and 10%.
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Ford’s big surge was a rare exception in January and had more to do with the maker’s aggressive campaign to catch up to leading rivals like General Motors and Volkswagen AG who dominate the Chinese market. GM managed to pull off a 12% increase for the month, but other maker’s numbers varied wildly.
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Toyota reported a full 118.1% surge – but it is recovering from a nearly two-year setback, like other Japanese automakers hurt by a boycott triggered by an ongoing dispute between China and Japan over ownership of a chain of uninhabited islands.
Rival Nissan saw a 0.4% decline for the month.
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The slowing pace could be particularly worrisome for all makers considering the heavy investments manufacturers continue to make in the Chinese market. Until recently, companies like Ford, GM, VW and Toyota could continue opening new plants confident that the market would absorb everything they could build. That may not be the case for long – which could prove a particular challenge for brands not already well-established in China, analysts warn.