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Ford Q4 US Sales Dip Due to Weak Passenger Car Demand

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Ford Motor (F) reported yet another quarter of dismal sales results on Monday. The second-largest US automobile company’s total vehicle sales in the domestic market fell 1.3% YoY (year-over-year) to 601,862 units. The YoY decline in the fourth-quarter sales was higher than Wall Street analysts’ expectation of a 1.1% decline. In fiscal 2019, the company sold 2.42 million vehicles—3% lower than its sales in 2018.

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Why Ford’s Q4 sales missed the estimates

Ford’s sales data reflect that declining demand for passenger cars mainly hurt its overall performance for the fourth quarter and fiscal 2019. During the fourth quarter, the company sold 63,400 passenger cars in the US—down 41% from the same quarter the previous year.

The demand for passenger cars has been falling in the US for the last several quarters. Buyers are shifting towards big passenger vehicles like SUVs and pickup trucks. Ford reported a decline in passenger car sales in all four quarters of the quarters in 2019. Overall, the company’s total car sales fell 28.2% YoY to 349,091 units in fiscal 2019.

Soft demand for Ford’s SUVs also weighed on its overall sales performance in the fourth quarter. During the fourth quarter, the company sold 180,957 SUVs—7.9% lower than the same quarter the previous year. Ford’s total SUV sales for fiscal 2019 fell 6.9% YoY to 742,578 units.

The company’s fast-selling Explorer SUV registered a 14.6% YoY decline in fourth-quarter sales due to some delivery issues. Notably, Ford didn’t launch the model at its Chicago factory in the third quarter. As a result, the company recorded a 48% YoY decline in Explorer sales in the third quarter.

However, Ford continued to witness strong demand for its pickup trucks. In the fourth quarter, the company sold 330,075 trucks—15.9% higher than the same quarter the previous year. The truck sales for fiscal 2019 grew 9.1% YoY to 1.24 million units. Higher pickup truck sales helped Ford partially offset the losses from the declining demand for its cars and SUVs.

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Brand-wise sales

The company’s total US sales fell 2.2% YoY to 568,507 units in the fourth quarter. In 2019, the Ford brand’s sales fell 3.5% YoY to 2.31 million units. The Lincoln brand’s fourth-quarter sales grew 17.8% YoY to 33,355 units due to strong SUV sales. In 2019, the Lincoln brand’s sales increased by 8.3% YoY to 112,204 units.

Shifting product mix to boost sales

Ford has outlined a mega-multi-billion dollar investment strategy to increase its sales in the domestic market. Due to consumers’ changing preferences, the company is trying to shift its focus to building more big vehicles like SUVs and pickup trucks, while reducing its passenger car portfolio.

Last April, Ford announced that it will only build the Mustang in the future. The company intends to phase out other passenger car models including the Fusion, Focus, Fiesta, and Taurus. During the third-quarter conference call, Ford said that it would replace 75% of its North American product lineup by the end of 2020.

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Ford eyes fast-growing EV space

The growing awareness for environment-friendly and energy-saving vehicles is driving the demand for electric and hybrid vehicles. Therefore, every US automaker is trying to grab market share in this fast-growing space. However, Tesla’s (TSLA) early foray in the space has given it an edge over other legacy automakers. Currently, Tesla is the leader in the US EV (electric vehicle) space with a market share of 80%.

Ford wants to expand its product portfolio in the fast-growing hybrid and EV market. The company plans to invest $11.5 billion globally to launch 40 new electric and hybrid models by 2022.

As part of the strategy, Ford will launch hybrid variants of the Lincoln Aviator, Corsair, Explorer, and Escape models this year. The company launched its first fully electric SUV Mustang Mach-E in November 2019. According to Ford, the model will compete with Tesla’s Model Y on features and with Model 3 on price point. Ford’s electric variant of the F-150 will compete directly with Tesla’s Cybertruck.

Ford has also invested and partnered with EV startup Rivian. The company has drawn significant attention from several automakers in recent years due to its unique “skateboard” chassis architecture. According to Rivian, the platform adjoins the EV’s motors, control systems, and batteries.

We think that the investment will help Ford build new hybrid vehicles and EVs rapidly. The company will be able to compete better with Tesla. According to a Reuters report, Ford’s first EV built over the skateboard platform could be its Lincoln SUV. The company plans to launch the battery-powered Lincoln SUV in 2022.

To learn more, read Electric Vehicle Startup Rivian Gets Fresh Funding.

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