Ford Resurges In Line With BMI Expectations

Ford Motors reported an 11.2% year-on-year (y-o-y) increase in car sales in the European region (which the carmaker defines as 20 markets) in the first quarter of 2014, to 297,900 units. This is commensurate with BMI's long-held view that the regional market would resurge in 2014, and be a source of sales and revenue growth for carmakers.

The company has released 10 new or updated models for the European market in 2014, and we believe this has helped drive the strong year-to-date sales growth. The company reported strong sales growth with retail and fleet customers in Q114, and these segments now account for some 73% of Ford's sales in the region. We believe Ford is well-placed to benefit from the sustained upswing in European sales in the coming year, as these new models help the company gain market share and the high-growth retail and fleet segments continue to buoy demand.

Bullish 2014 Outlook

Holding Support On European Performance
Ford Motor Share Price, USD

Ford Motors reported an 11.2% year-on-year (y-o-y) increase in car sales in the European region (which the carmaker defines as 20 markets) in the first quarter of 2014, to 297,900 units. This is commensurate with BMI's long-held view that the regional market would resurge in 2014, and be a source of sales and revenue growth for carmakers.

The company has released 10 new or updated models for the European market in 2014, and we believe this has helped drive the strong year-to-date sales growth. The company reported strong sales growth with retail and fleet customers in Q114, and these segments now account for some 73% of Ford's sales in the region. We believe Ford is well-placed to benefit from the sustained upswing in European sales in the coming year, as these new models help the company gain market share and the high-growth retail and fleet segments continue to buoy demand.

Holding Support On European Performance
Ford Motor Share Price, USD

Bullish 2014 Outlook

BMI believes that the European regional market will post a resurgence in 2014 on the back of pent-up demand from several years of sustained declines and modest improvements in consumer sentiment.

In Q114, Ford reported a market share of 8.3% in the five large Western European economies of Spain, UK, Italy, Germany, and France. These countries constituted some 75- 80% of sales in the 20-country European bloc.

In 2014, we expect the regional market to post modest sales growth, with 2.4% growth forecasted in the Western European markets. We believe that this represents a bounce-back effect from years of pent-up demand (and delayed purchasing decisions), rather than a return of consumer confidence. That said, preliminary data releases from several large Western European markets suggest that sales continue to surprise to the upside - in Spain, for example, car sales have increased 11.8% y-o-y in Q114, exceeding our initial expectations and prompting us to revise up our full-year sales forecast for the market ( see 'Vehicle Sales Growth To Defy Weak Consumer Story', April 4).

Europe Leading The Way

Europe is Ford's second biggest market, behind North America, and as such, its performance there is a key driver of financial performance. We believe that the region will become less of a drag on Ford's results going forward, and could even start becoming accretive to the carmaker's bottom line in the coming quarters, if conditions continue to improve ( see 'Europe Turnaround Will Be Feather In Ford's Cap', March 7). Indeed, as we expected, Ford's share price has maintained long-term support levels in recent months ( see graph) on the back of this strong European performance.

Furthermore, this European resurgence is commensurate with BMI's view that developed markets (DMs) will be a greater source of revenue and sales growth in 2014 than emerging markets (EMs). Indeed, we believe the latter will generally register lower rates of growth than those seen in previous years, as private consumption moderates and high base effects temper car sales growth.

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Related sectors of this article: Autos, Companies - Autos
Geography: Europe, Thailand
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