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Ford of Europe posts encouraging 16% sales rise in June, company believes Russia will stabilise

Published: 7/15/2015

Ford of Europe recorded strong sales in June and the first half of 2015, largely thanks to healthy demand for the new Mondeo.



IHS Automotive perspective

 

Significance

Ford of Europe posted an encouraging 15.8% year-on-year (y/y) increase in sales to 126,800 units in June thanks to strong demand for the new Mondeo, while the Kuga and EcoSport also contributed. Meanwhile, in contrast to rival General Motors, the company believes that Russia will recover and remains committed to the market.

Implications

Ford of Europe also registered a very strong sales increase in the first half of 2015, of 10.5% y/y to 668,800 units, outperforming the wider market in the 20 countries that it uses to constitute the European market. Its commercial vehicle sales were also up by 33% y/y in the first half as a result of the new Transit.

Outlook

There is no doubt that the Mondeo has boosted sales but the company's other best-selling models, the Fiesta and the Focus, are well into the second half of their model cycles, although the latter has undergone recent mid-life revisions. Ford's performance in Europe is testament to the quality of its current model line-up and the recovery of the European market. This recovery remains fragile but the company is hoping that its steadfast commitment to the Russian market will pay off in the long run.

Ford of Europe recorded strong sales in June and the first half of the year, according to a company press release. The automaker's European unit posted very robust sales growth of 15.8% year on year (y/y) to 126,800 units in June, while in the year to date (YTD) the company has posted a 10.5% y/y increase to 668,800 units. In the 20 countries that according to Ford make up Western Europe, it therefore outpaced the June and YTD overall market growth rates of 15.1% and 8.6%, respectively. Ford said its growth in June and the first six months of the year was driven by "higher value sales channels" such as the private retail and fleet segments, suggesting that Ford has managed to cut down its pre-registrations in Europe in comparison with its rivals. The company stated that retail and fleet sales accounted for 71.3% of its total sales in the first half, 2.3 percentage points higher than the industry average. The new Mondeo posted a 55% y/y increase in unit sales over the old model in the first half of the year. The fleet market is particularly important for the Mondeo and the market has responded very well to the new model and its range of low-emission and low-consumption engines, with the 1.0-litre EcoBoost variant the only 1.0-litre D-segment car on sale in the world. As Ford of Europe vice-president for marketing and sales Roelant de Waard said, the company has more new models in the pipeline, which should further boost sales. He said, "We delivered a strong first half of 2015 and expect to continue our momentum with a host of new vehicles – including S-MAX, Galaxy, C-MAX, Mondeo Vignale and Mustang – reaching dealerships this summer. This historic product push is well timed as we have started opening a network of flagship Ford Stores in cities across Europe, offering a truly modern and world class experience for customers." As part of the major corporate drive to increase sales, improve its image, and expand its model line-up in Europe, Ford has also begun offering the Mustang and recorded positive interest in the model in the first half of the year, taking 6,700 orders. In terms of the company's more mainstream offerings, the C-Max enjoyed a strong increase of 42% y/y in June, while sales of the Fiesta were up 24% y/y despite the model being towards the latter end of its model cycle. The Kuga sport utility vehicle (SUV) posted a 24% y/y rise in sales in the first half of the year, while Ford's commercial vehicle sales rose by 19% y/y in June and by 33% y/y in the first half thanks to the launch of the Transit.

Meanwhile, the company is confident that there will be a recovery in the Russian market, where it was one of the first foreign OEMs to invest heavily when it established a manufacturing facility in St Petersburg in 2002. Despite a 36% y/y slide in the overall Russian light-vehicle market in the first half of this year, Ford is confident that its ongoing commitment will pay dividends. Ford is taking the exact opposite view to General Motors (GM), which is pulling out of the Russian market as a volume and full-range carmaker at the end of this year. Ted Cannis, the CEO of Ford's Russian JV, Ford Sollers, said, "The market will stabilize, but it will be a very fragile stabilization. I believe July and August will be weaker than June. But there is hope that the situation will improve in the autumn as inflation slows."

Outlook and implications

Ford of Europe's sales performance in the first half of this year and in June is a positive sign that the unit is benefiting from the new corporate strategy announced in 2012. Ford's response to the economic downturn and subsequent pressure on the European market was to commit to expanding its model range, while at the same time planning to improve capacity utilisation across its production facilities in the region by closing down its Genk plant in the Netherlands (see Europe: 7 September 2012: Ford Announces Massive New Product Offensive for Europe). The company is reaping the rewards of this product offensive now, including the controversial decision to delay the introduction of the new Mondeo by two years, which was almost unprecedented in the European industry. However, it still has some weak points in its European product line-up, with the EcoSport, although recently revised, not up to the SUV-B class standard, especially in terms of styling, which is an important element of these small lifestyle vehicles. It should also be said that the B-Max small MPV has missed the mark. However, its mainstream B-, C- and D-segment European model line-ups are class-leading, or near class-leading, and the Fiesta continues to sell well despite being in its sixth year of the current model iteration. However, sales might be strong but it is important how these sales are being generated. If they are reliant on aggressive incentives and discounting, Ford of Europe will not add to the parent company's bottom line, while the situation in Russia remains a serious drag on Ford of Europe's performance. The company earlier this year revised the unit's forecast performance for 2015, now expecting a full-year loss (see United States - World: 29 April 2015: Ford's profit, margins slip in Q1, expected to improve in H2). The situation in Russia remains a concern, with Ford's sales here underperforming the weak market, posting a first-half decline of 56% y/y, not helped by the relatively high price points of Ford's vehicles in the country and their relatively high levels of imported content. However, Ford is hoping that by staying the course, unlike GM, it will reap the benefits of the Russian recovery when it comes, with a gradual uplift in the market forecast from 2016.

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