Ford's Sales Slip Again as Sedan Sales Dwindle

John Rosevear, The Motley Fool

Updated Wed, May 2, 2018, 6:05 PM

How Ford fared against rivals

Ford was far from the only automaker to post a decline in U.S. sales in April, which had two fewer selling days than the year-ago month:

Toyota (NYSE: TM) matched Ford's 4.7% sales decline, as sales of its high-volume Camry sedan fell 9.5%.
Honda's (NYSE: HMC) U.S. sales fell 9.2%, with all three of its biggest sellers -- the Civic, Accord, and CR-V -- posting significant year-over-year sales declines.
Nissan's (NASDAQOTH: NSANY) U.S. sales fell a whopping 28%, on lower incentives and a planned pullback in fleet sales. Tight supplies of the midsize Altima, which is transitioning to an all-new model, may have also been a factor.

But Ford's old Detroit rival Fiat Chrysler Automobiles (NYSE: FCAU) bucked the trend. FCA reported a 5% year-over-year sales gain for April, driven by strong demand for Jeeps and its Dodge Caravan minivan.

But FCA's average transaction price (ATP) for the month appears to have fallen year over year, suggesting that discounting may have helped give sales a boost. (According to Kelley Blue Book estimates, Ford's ATP rose over the same period, as did Toyota's, Honda's, and -- slightly -- Nissan's.)

(Note that General Motors is now reporting its U.S. sales quarterly instead of monthly. A Bloomberg report citing "people familiar with the matter" said GM's U.S. sales probably fell 2.5% to 3% in April, but we'll have to wait until GM releases its next report in July to find out for sure.)

A red Ford F-150 diesel-powered pickup truck is shown pulling a trailer.

Pickup sales have been a huge strength for Ford. A new diesel version of the F-150 could give sales an additional boost later this year. Image source: Ford Motor Company.

High and low points from Ford's April sales report

The high points:

Ford's biggest profit generator, the F-Series pickup line, continued to perform well in April. Sales rose 3.5% from a good year-ago result, for the line's 12th consecutive month of year-over-year sales gains. It appears that discounts aren't driving sales: Ford said that F-Series' ATP rose about $900 from a year ago, with high-profit upper-level trims accounting for roughly half of sales. That's good news for profitability.
Retail demand continues to be very strong for the all-new versions of Ford's biggest SUVs, the Ford Expedition and Lincoln Navigator. Retail sales rose 26% and 135%, respectively. Dealer supplies of both continue to be tight, particularly with the Navigator; Ford is working to increase production of both. Ford said that Expedition inventories are getting close to optimum levels.
Ford said that the Navigator's ATP was up a whopping $26,300 from that on the prior-generation model a year ago.
Sales of Ford's smallest SUV, the new-to-America EcoSport, continued to grow. Ford sold 5,277 EcoSports in the U.S. last month, outpacing the similarly sized Fiesta (3,151 sold in April). Ford said demand for the little SUV has been particularly strong in northeast U.S. metropolitan markets -- New York, Boston, and Philadelphia.
Kelley Blue Book estimates that Ford's overall ATP, including results for the Lincoln luxury brand, was $39,906 in April. That's about $4500 above Kelley Blue Book's estimated industry average.

The low points:

Demand for crossover SUVs across the industry is still red-hot, but Ford's well-known models aren't performing well. Sales of the Escape, Edge, and Explorer were all down in April. The problem isn't supply: Dealer inventories of all three were plentiful as of the beginning of the month.
With one insignificant exception, none of Ford's car models managed sales gains in the U.S. in April. Focus sales were not too bad, at just over 13,000, down 1.5%, but sales of the Fusion, once Ford's mainstay sedan, were just 12,871, down 23% from a year-ago result. (The insignificant exception was the hyper-expensive GT supercar: Ford sold 10 in April, up from 2 a year ago.)
Ford's Lincoln luxury brand had a strong run, but its sales are now suffering as well. Sales of every model aside from the tiny-selling MKT (271 sold in April) and all-new Navigator were down from a year ago. (The MKT, a sibling of the Ford Flex, is probably in its last year of production. It makes a nice airport limo; I suspect that nearly all of its sales are to fleet operators at this point.)

A white 2019 Ford Fusion, a midsize sedan, on a city street.

The slow-selling Ford Fusion will get a mild update for 2019. But an all-new version that was in the works has been cancelled. Image source: Ford Motor Company.

The takeaway for investors: Pricing appears to be the story

Ford has announced plans to cut most car models from its U.S. lineup, so that it can use most of its existing North American sedan production lines to make more-profitable trucks and SUVs instead. There are a slew of new Ford SUVs on the way, including all-new versions of the Escape and Explorer due next year.

The upshot of that grand plan is that many current Fords are set to be discontinued or replaced over the next couple of years. Many are competing against fresher, more up-to-date products from big-name rivals.

Given all of that, the real story here appears to be that Ford is resisting the temptation to offer big discounts in order to boost sales. By choosing to take sales declines on once-huge-selling models like the Explorer, Fusion, and Escape instead of discounting, CEO Jim Hackett and his team are betting that the profit lost from the decline in sales will be smaller than the profit it would have lost from boosting incentives.

It seems like the right bet. I think Ford's last two CEOs, Alan Mulally and Mark Fields, would have made the same bet. Whether it really is the right bet is something we'll find out over the next few quarters.

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