TLDR:
- Ford has suspended exports of several vehicle models to China due to 150% retaliatory tariffs
- Affected models include F-150 Raptor, Mustang, Bronco SUV, and Lincoln Navigator
- Ford continues to export US-built engines and transmissions to China
- Ford’s China exports dropped to 5,500 units last year, down from 20,000+ in previous years
- The company’s China operations generated $900 million in operating profit last year
Ford Motor Company has halted exports of several vehicle models to China as trade tensions between Beijing and Washington continue to escalate. The American automaker suspended shipments of its F-150 Raptor pickup truck, Mustang sports car, Bronco SUV, and Lincoln Navigator to the Chinese market after China implemented retaliatory tariffs as high as 150%.
“We have adjusted exports from the US to China in light of the current tariffs,” a Ford spokesperson told the Wall Street Journal.
The affected vehicles are manufactured in Michigan and Kentucky. Ford exported approximately 5,500 units of these models to China last year.
This represents a steep decline from previous years when the company shipped an average of over 20,000 vehicles annually to the Chinese market.
Export Strategy Shifts
Despite the suspension of vehicle exports, Ford continues to ship US-built engines and transmissions to China. The company is also maintaining imports of the Lincoln Nautilus from China to the US.
The automaker has been using its factories in China as export hubs, shipping vehicles to Southeast Asia and South America.
Ford’s vice-chairman John Lawler stated that the company’s operations in China generated an operating profit of about $900 million last year.
However, Ford’s overall sales in China have been declining. The company sold around 400,000 vehicles in China last year.
This is a substantial drop from approximately 1.3 million vehicles sold in 2016.
Price Increases Expected
If the tariffs remain in place, Ford expects to increase the prices of its new vehicles. This plan was outlined in an internal memo sent to dealers, according to Reuters.
Ford might be better positioned than some competitors to handle the tariff situation. The company produces about 80% of its US-sold vehicles domestically.
This manufacturing strategy could help buffer some of the impact from the ongoing trade disputes.
Future Outlook
Earlier this week, former President Trump, now back in office, hinted at the possibility of modifying the auto-related tariffs. He suggested that exemptions on current levies might be considered.
Last month, Ford announced plans to invest up to €4.4 billion ($4.8 billion) in its German subsidiary, Ford-Werke. This investment aims to revitalize and increase the competitiveness of its European business.
Wall Street currently has a Hold consensus rating on Ford stock. This rating is based on three Buy, nine Hold, and three Sell recommendations from analysts.
The average price target for Ford stock is $9.46, which implies a slight downside of about 2% from current levels. Ford stock has declined 20% over the past year.
The trading session today saw Ford shares up 2.45%, showing some resilience despite the challenging news about China exports.
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