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Could Higher Retail Sales Help Ford Boost Its Margins?

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Dec. 4 2020, Updated 3:53 p.m. ET

Ford’s January sales

Ford Motor Company (F) sold about 172,612 vehicle units in the US in January 2017. This reflects a YoY (year-over-year) decrease of about 1%.

During its 4Q16 earnings event, Ford highlighted potential risks that it might face due to softening US auto sales. Please read Ford’s 4Q16 Earnings: Another Disappointment? to learn more about its 2016 results and 2017 outlook.

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Ford’s US retail sales

In January 2017, Ford’s US sales to retail customers rose 6% YoY to 120,400 vehicle units. In the previous month, the company’s retail sales also stood strong at 183,454 units, which was about 5% higher than its retail sales in January 2016.

In the last few months, Ford’s retail sales have been growing positively while its fleet sales have been declining.

In the auto industry, fleet sales can be defined as wholesale vehicle sales to customers such as rental car companies, government departments, and other private companies that use commercial vehicles. Fleet sales help automakers (VCR) increase their revenues and market share.

Retail sales and margins

Fleet vehicle sales typically tend to have lower margins than retail vehicle sales. To maintain good profitability, it’s important for automakers such as Ford, General Motors (GM), Fiat Chrysler (FCAU), and Toyota (TM) to focus more on retail sales. Therefore, the recent growth of Ford’s retail sales could help the company boost its 4Q margins.

In the next part, we’ll take a look at another key factor that plays a critical part in boosting Ford’s margins and profitability.

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