Ford Motor Company (F - Free Report) has scrapped its plan to sell China-manufactured Focus Active in the United States, per Reuters. The plan to not import Focus Active has been taken to safeguard the company from higher U.S. tariffs.
The crossover, Focus Active was introduced in April for the global markets. Intended to launch the model as a niche product in the United States, Ford would have set the starting price at around $20,000. This pricing would have let the company witness a thin profit margin, making it difficult to absorb additional import duties. Per management, increased tariff rates would have led to augmented costs for Ford. However, its plan to introduce Focus Active in Europe and China will continue as planned.
The decision by the company has been announced at a time when the trade war between the United States and China is escalating. The U.S. government has already imposed a tariff of 25% on China-manufactured vehicles. Further, based on national security grounds, the government is assessing a proposal to enforce tariffs on all imported vehicles.
Ford Motor Company Price and Consensus
Almost 95% of the Ford vehicles sold in the United States are manufactured in the country itself, along with Canada and Mexico. Except for this, its EcoSport small sport utility and Transit Connect small vans are manufactured in India and Spain, respectively. Currently, Ford is not extensively exposed to risks due to vehicles produced outside the United States.
In the last month, General Motors Company (GM - Free Report) filed a tariff exemption request for its Buick Envision utility vehicle produced in China. Per the filing, importing the China-manufactured model in the United States enables the company to compete against its counterparts. In 2017, Buick Envision’s U.S. sales were 42,000 units compared with China’s number of 210,000 units. The minuscule U.S. sales will not support shifting the factory location to the United States.
In the past three months, Ford’s stock has lost 19.2%, underperforming 8.1% decline recorded by the industry it belongs to.
Zacks Rank & Key Picks
Ford currently carries a Zacks Rank #5 (Strong Sell). A few better-ranked stocks in the auto space are PACCAR Inc. (PCAR - Free Report) and Navistar International Corporation (NAV - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PACCAR has an expected long-term growth rate of 10.8%. Over the past month, shares of the company have gained 5.4%.
Navistar has an expected long-term growth rate of 5%. Shares of the company have risen 3.1% in the past month.
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