Shares of Ford Motor Co. (F) fell 0.9% and closed at $16.87 on Aug 5, due to the overall market decline, despite media reports revealing the company’s plans to expand presence in Africa. The rapidly developing economy of the continent backs Ford’s expansion plans.
Ford intends to expand its factory base in the continent from the existing two factories. The automaker looks to tap in on the rapidly growing vehicle market of Africa by meeting the rising demand. The behind-the-wheel count in Africa is projected to improve 55% to 840 million by 2023.
Importantly, Ford has created a new business unit – Ford Middle East and Africa – to capitalize on the growing importance of the respective markets. The combined region is expected to witness a 40% surge in industry sales, taking the figure to 5.5 million by 2020.
To strengthen its foothold in this lucrative market, Ford intends to launch 17 new or revamped cars under the Ford and Lincoln brands in 2014 and 2015. The new vehicles will include right-hand-drive versions of the Mustang, Fusion sedan and Focus small car. The company also intends to make customer support and car parts easily available in the region.
However, Ford faces significant challenges in the Middle East and Africa region, which include the Ebola outbreak in Liberia and Sierra Leone along with the civil unrest in Nigeria aimed at imposing Islamic law. Nevertheless, braving all the odds, Ford will make a detailed analysis of the region to determine the number of factories and dealerships it needs to add in Africa.
Since 2010, Ford has invested $500 million in South Africa in order to manufacture Ranger compact pickups and Duratorq diesel engines. The company manufactures the Ranger at an assembly plant in Pretoria while the engines are produced at Port Elizabeth factories. Ford’s total employee base in the country is 3,200 people.
In the Middle East and Africa segment, Ford’s revenues totaled $1.1 billion in the second quarter of 2014. The region earned a pre-tax profit of $23 million, compared with $13 million a year ago. Further, Ford expects break-even results at the segment in 2014.
Ford currently carries a Zacks Rank #3 (Hold). Better-ranked automobile stocks worth considering include Tesla Motors, Inc. (TSLA), Visteon Corporation (VC) and Accuride Corp. (ACW), which sport a Zacks Rank #1 (Strong Buy).