Another competitor
The car industry is highly competitive. It is a high-stakes, high money game. Ford Motor Company (NYSE:F) knows this. But you’d never see a company like Ford, which made $5.6 billion on $134 billion in revenue, trying to do Tesla-type things like cut out dealers or build fueling stations. There is simply too much legacy involved; in effect, the tradition of Ford actually hinders its ability to take as many risks.
Ford Motor Company (NYSE:F) didn’t really take risks going into China either, and that has resulted in a paltry 3.2% market share in 2012. It’s an improvement, though – that was their first year being over three percent in market share. Ford recognizes the growth numbers in China will go up over the next ten years and is making sure that it is a part of that.
Ford is releasing its own electric vehicle in the United States, the 2014 Focus, which gets 76 miles per charge. Given China’s mostly metropolitan-based demographics of car ownership, the battery-powered Focus could be a good seller there. Ford Motor Company (NYSE:F) CEO Alan Mulally has said that Ford will sell it there at some point. Add in the fact that they have recently build five plants on the mainland and you can see they are trying hard not to continue to fall behind in China.
Bottom line
Chinese central planners have said that they want to have 5 million electric cars on the road there by 2020. That’s only seven years away. General Motors Company (NYSE:GM) wants to sell the Volt there, but it is afraid of its local partners stealing the battery technology and hurting General Motors Company (NYSE:GM)’s business there. Ford Motor Company (NYSE:F) has a Focus that it desires to sell in China, which would seem to be a hit in a market where small cars are what the middle class buys.
Then there’s Tesla Motors Inc (NASDAQ:TSLA). It has luxury and sport electric vehicles that could be a hit in China. It really needs to do something, as losses continue to mount, with a record $396 million loss in 2012. Tesla could garner major profits and see excellent margin growth by selling premium cars in China; it’s all just a matter of CEO Elon Musk making the move to do so. Earlier this year, Tesla Motors Inc (NASDAQ:TSLA) representatives said a flagship store in Beijing would open by spring. It hasn’t happened yet.
The article The One Market That Will Bring Tesla Profits originally appeared on Fool.com and is written by Daniel Cawrey.
Daniel Cawrey has no position in any stocks mentioned. The Motley Fool recommends Ford, General Motors Company (NYSE:GM), and Tesla Motors . The Motley Fool owns shares of Ford Motor Company (NYSE:F) and Tesla Motors Inc (NASDAQ:TSLA). Daniel is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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