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These Factors Could Have an Impact on Ford’s 3Q17 Profit Margins

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Higher truck sales, lower SUV sales

In August 2017, Ford Motor (F) sold 96,619 units of trucks with a solid increase of about 9.3% YoY (year-over-year). However, sales of its SUV (sport utility vehicle) segment witnessed a massive fall of ~11.3% to 65,626 units in August 2017, from 73,962 units sold in August 2016, reflecting negativity.

In May 2017, Ford reported its highest truck segment sales of 99,000 in 2017 so far.

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Another negative factor

Ford’s August 2017 US sales to retail customers were 164,067 vehicle units, a 2.7% fall from August 2016. In July, the company’s US retail sales fell 1.0% YoY to 159,492 units.

Impact on 3Q17 profitability

As we saw in the previous part of this series, utility vehicles and trucks yield higher margins for automakers than small cars. While higher US truck sales in August were a positive factor for Ford, a significant fall in US SUV sales could hurt its 3Q17 profitability.

A fall in August retail sales could provide headwinds to Ford’s 3Q17 profit margins since retail sales generate higher margins than fleet sales.

The US demand for heavyweight vehicles such as SUVs and trucks has risen significantly in the last couple of years. This positive sales trend has benefited all legacy automakers (IYK), including Ford, General Motors (GM), Toyota (TM), and Fiat Chrysler (FCAU).

Next, let’s look at General Motors’ August 2017 US sales data.

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