This is turning out to be a very good year for car companies in general as there are reports that they are beginning to bounce back, showing higher sales reports for the first quarter of 2012. Of course, the conundrum will be which company will you want to buy into if you had to pick only one?
Well, there is a strong sense that it might just be Ford (F), because it has a lot of new products and moves that the press is soon to be gushing over. For example, Ford recently released its new 2013 F-150 model, which looks amazing and should be an instant buy for people who love Ford trucks. This has the effect of increasing positive sentiment for the company and will result in a higher trading price, which investors will want a piece of and something that current stockholders may want to take advantage of and turn a decent profit.
Ford is going to sponsor two Honor Flights on the 68th anniversary of D-Day for 75 World War II veterans to visit the memorial in Washington, D.C. The goodwill generated on the part of Ford for doing this is something that will resonate kindly with people who are looking to buy a truck or a car. They will remember that Ford helped veterans remember their friends and brought their family along to honor the memory of people who died for the country, and that might just be enough to convince them that Ford is entwined in American tradition. A win-win for Ford and for the veterans here.
Ford is not just helping old people, it is also helping the environment. In a partnership with other large businesses, Ford is helping to forward the development of plant-based plastics. This is good news for all of the companies since they will all stand to profit from the development of this technology. Imagine the sales boost from the eco conscious sector when the Plant PET Technology Collaborative (what the partnership goes by these days) finally develops a plastic product that is 100% plant-based. It will be an investment that Ford and the others will not consider a waste of time and money and will reflect better on them at the end of the day.
While discussing partnerships, no one can deny that a pairing with Microsoft (MSFT) for its SYNC in-car connectivity platforms which can now apparently speak Mandarin to do the same functions that Americans could do with their own copies of the program (play music, control their iPods and their phones) is going to be a big hit. Presented at the Computex Taipei 2012, this is something that people in China might just have to look out for, as it may be the prelude for Ford to start infiltrating their markets and making sales there.
That might be exactly what Ford is thinking right now. It is thinking of releasing China-only brands for sale in the local market. That might be a good idea given the fact that design changes might be made, but it might just alienate the brand from the overall Ford concept – something that investors might be wary of. It sounds like a good idea, but a risky one to execute.
Remember when I started with the claim that this is a very good year for auto retail companies? Well, Ford is not an exception to that. It recently reported an increase of 13% from May sales last year due to strong demand for its trucks and SUVs. This is something to be optimistic about, because it means people are not afraid to buy gas-guzzling trucks even in the midst of oil problems, something that might derail this recovery.
However, as we said, Ford is not the only one surging in sales. Daimler and its Mercedes-Benz car division reported a 3.1% increase in global sales in May as compared to last year. This is good as well for the high-price models as it means people are still willing to spend money on luxury vehicles that have good reliability and excellent standards.
Not to be outdone, Honda (HMC) also reported a 48% increase in sales in its American division from last year from sales of its Accord and Civic sedans, which garnered impressive sale boosts from a year ago. People are sending mixed signals with its purchases – if Ford can record high sales on big trucks and Honda can sell more sensible cars that are fuel-efficient, then it stands to reason that people simply want to buy a new car.
Well, there are cars that may not make the cut in a very healthy market. Tesla Motors (TSLA) really got hit hard, saying that the environmental advantage hype that these electric cars provide are offset by the byproducts that may hinder its growth and will be a big miss for the company in general. Investors should stick to conventional car companies in the meanwhile.
A big “but” to the conventional car companies is General Motors (GM). While no one denies that it is a good buy, the hubbub over its pension plans might just push investors out. At this point, things are not clear and if current employees do not like it, they might just decide to say goodbye to the company. It might just be a bad move and could merit bad karma in the future.
Investing in Ford does not come without risks. Investors should closely watch to see if Ford can meet analysts’ expectations going forward. Though the auto industry has been steadily recovering from the recession, automakers, including Ford, have been lagging behind expectations. While Ford’s new vehicle sales in the U.S. rose 13% from May 2011 to May 2012, these results lagged behind analysts’ expectations of a 14% gain. In addition to this, the days of selling huge, high priced F-350 Pickup Trucks and Navigators are over for Ford. While high gas prices will allow Ford to move a large volume of its smaller cars like the focus, thinner margins on its smaller cars will reduce overall profits for the company.
Despite the risks, Ford looks like a very good buy and it could very well take the whole market by storm with all of its new developments.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.