In a word, Ford’s current operation in the Chinese market is a “light asset” model.
What’s the effect? Recently Ford released its Q3 results.
Ford’s third-quarter revenue was $46 billion, up 5 per cent from a year earlier.
This is also Ford’s 10th consecutive quarter of revenue growth compared with the same period last year.
However, as net income fell 25 per cent to $900m, its adjusted EBIT was $2.
6 billion, up only 18 per cent from $2.
2 billion in the same period last year.
Ford attributed part of the decline to $1 billion in costs related to electric vehicles.
As Ford CEO Jim Farley said on the earnings call China and its exports contributed more than $600m to Ford’s earnings before interest and tax this year including exports to the rest of Asia and South America.
So how did the profit contribution of 600 million US dollars in the Chinese market come from? China contributed strategically as Farley said all of these regions are now profitable after restructuring their overseas operations in Europe South America India and China a few years ago.
In the final analysis, this is the effect of supply chain integration, especially for China’s supply chain integration.
It is not surprising that Ford’s strategy has changed nearly 180 degrees since Jim Farley visited China in 2023.
The biggest shift has been a “light asset shift” and Chinese factories have become bases for delivering high-quality products to its global market.
In response, Ford CFO John Lawler (John Lawler) said: “‘light assets’ enable us to remain profitable in China.
” This mainly comes from our joint venture or Jiangling’s export strategy, and the export of these cars to other parts of Asia and South America has brought considerable profits to Ford Blue.
” According to the export table of the Federation of passengers in August (no data are available in September), we can see that from January to August this year, the cumulative exports of Changan Ford and Jiangling Ford were 40589 and 0 respectively (not declared this year).
Among them, Changan Ford Mondeo is 10564, Ford Lincoln navigator is 30019.
There is a lack of data here.
Jiangling Ford’s Leader Rui exported more than 70,000 vehicles in 2023, but after asking Ford people in China, we learned that export data are no longer declared.
It can be seen from the public channels that Jiangling Ford exported 16000 vehicles in a single quarter in the third quarter.
In addition Jiangling Ford released sales in the first half of the year with a total of 50758 units at home and abroad.
According to the Federation of passengers, domestic wholesale sales in the first half of the year were 11940 vehicles.
According to this projection, the total export volume in the first three quarters is 50758-11940 million 16000 million 54,818 vehicles.
Of course, this is only an approximate calculation, but we can see that the export volume is already very good.
There should be more than 70,000 this year.
Based on a profit of 4.
2 billion yuan (7 U.S. dollars), Ford’s exports to China exceeded 100000 in 2023, which means that each of these exported vehicles can earn about 40, 000 yuan for Ford.
Usually we don’t pay much attention to it, but Ford’s profit source of $600 million is real.
Wu Shengbo, president and CEO of Ford China, also said at the beginning of the year that Ford’s latest goal is to triple its 2023 exports to 300000 vehicles by 2027.
This also shows that Ford has really benefited from the cost advantage of China’s industrial chain.
Another point is that Ford’s production capacity in China, especially Changan Ford’s production capacity, has been greatly reduced, reducing fixed cost expenses.
At its peak, Ford’s joint venture in China, Changan Ford, had a production capacity of 1.
6 million vehicles.
I have made statistics in previous articles.
Among them, Changan Ford’s first plant was put into production in Chongqing in 2004, Changan Ford’s second plant was put into production in 2012, and Changan Ford’s third plant was put into production in 2014, with a total production capacity of 1.
15 million vehicles.
Changan Ford’s fourth plant was put into production in Hangzhou in 2015, with an annual production capacity of 250000 vehicles.
In addition, the fifth plant of Changan Ford (Harbin) was officially launched in 2015 and put into production around February 2017, with a capacity of 200000 vehicles.
By May last year Changan Ford told the media that the entire vehicle plant had a production capacity of 670000 vehicles.
There is no new information at present, but some of it should continue to be integrated.
The compression of production capacity makes the operation of Changan Ford much healthier.
Besides for the time being Changan Ford dealers are in relatively healthy condition.
Under the scroll, how can I achieve “positive growth”? | as mentioned in “one sentence comment”, as far as I know, the profit margin of Changan Ford dealers is basically 60% to 70%.
This is also the help of Changan Ford’s sales from “rebound” to “positive growth”.
Electric vehicles need to be “strong”.
As a listed company, maintaining stable profits is the basis for the survival of enterprises.
Therefore, in terms of expected profit, according to the financial report, Ford expects full-year adjusted earnings before interest and tax of $10 billion and adjusted free cash flow of between $7.
5 billion and $8.
5 billion.
For investors, it also provides plenty of confidence.
In addition, retail sales of Ford’s American Q3 increased by 3%, and overall sales increased by 1% compared with the third quarter of 2023.
At present, overall car sales rose 2.
7% in the first nine months of 2024.
On the whole, it is still relatively stable and will not have too many ups and downs.
Ford’s business and software business Ford Pro remained the main potential, with sales and revenue up 9 per cent and 13 per cent, respectively.
The division also generated $1.
8 billion in operating profit, with a margin of 11.
6 per cent before interest and tax.
John Lawler, Ford’s chief financial officer, described Ford’s third-quarter results as “robust” in a call to the news media, but said the carmaker was “driving” unprecedented changes in the industry.
The reason is that Ford’s electric car business is still under pressure.
Although Ford’s electric vehicle sales rose 12%, selling 23509 units in the third quarter, Ford Model e, which carries the electric vehicle business, still lost $1.
2 billion in the third quarter.
Moreover, its electric car sales have been overtaken by General Motors and Hyundai Motor Group, including Kia and Genisse.
However Ford says lower material and battery costs have resulted in cost improvements of nearly $1 billion so far this year.
Ford expects a loss of about $5 billion in its electric vehicle business in 2024 and a loss of $3.
7 billion in the first three quarters.
Therefore, these improvements are not enough to overcome the “industry-wide pricing pressure”.
Farley said he would take “tough action””, creating advantages in key areas such as software and next-generation electric vehicles.
, In August this year, Ford said it would change its electric vehicle strategy to ensure that electric vehicles will be profitable within one year of launch.
Among them, Ford began to expand its electric vehicle business in Europe.
In addition, Ford’s global sales of hybrid models increased 30% this quarter.
Of course, for Ford, at least until 2026, the price pressure on electric vehicles is still very high.
As the competition between Tesla and China automakers has become increasingly intense over the past year, Farley made a difficult decision about the company’s electric vehicle lineup, canceling plans for a three-row electric SUV because the car would not be profitable within the stipulated time frame.
For future product planning, Farley claimed that the mid-sized electric pickup truck designed by the California team would match the supply chain of China automakers produced in Mexico.
He revealed that the Ford team used a completely different “Skunk Works” method (the method previously used to produce the Blackbird SR-71) to develop the vehicle and verified the design by inspecting various suppliers.
On the key battery front, last year, the U.S. Department of Energy announced a $9.
2 billion loan to BlueOval SK LLC to build three battery plants to produce batteries for future Ford and Lincoln electric vehicles.
BlueOval SK is a joint venture between Ford and South Korean battery manufacturer SK On.
The loan is managed by the U.S. Department of Energy’s Loan Program Office.
, In addition, Jim Farley also had a Xiaomi SU7 airlifted to Chicago and drove it himself for half a year to experience the technical strength of China’s electric vehicles.
In fact, Ford is also feeling the pressure from China automakers.
Not long ago in May, Detroit-based automotive data research firm Caresoft Global disassembled a BYD Seagull and felt its ability to even make people “desperate”.
“This was an eye-opening experience for us and allowed us to see the true cost of many advanced components, especially because we think companies like BYD have an incredible advantage in battery affordability.
” Therefore, we must make up for our opportunities in terms of electric vehicle parts, inverters, gearboxes, motors, etc.
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