In the last years, Ford Motor Company (NYSE: F) has been renovating its model line in North America. The iconic automaker has suspended virtually all of its sedans and hatchbacks. Meanwhile, it doubled in crossovers, SUVs and trucks, bringing a host of new entrances and updated versions of existing models.
This transformation has many long-term promises. However, this is causing some pain for Ford in the short term. Production disruptions related to the pandemic have exacerbated the challenges. As a result, Ford reported a 10% drop in U.S. deliveries in the last quarter of 2020.
Image source: Ford Motor Company.
Solid results for crossovers and SUVs
Some aspects of Ford’s domestic sales performance in the fourth quarter were quite respectable. Deliveries of crossovers and SUVs increased 4% year-over-year, as an 8% increase in retail deliveries more than offset lower fleet sales. The Ford Explorer was the best performer, with deliveries in the U.S. increasing 29% year over year to 66,008. While Ford was facing an easy year-over-year comparison for Explorer due to production problems a year ago, total fourth quarter deliveries for Explorer also increased 2% compared to the fourth quarter of 2018.
The increase in crossover and SUV sales did not fully offset the decline in Ford car sales in the last quarter. However, new SUV models that could help revive Ford’s fortunes were not yet widely available. The company delivered 5,120 Bronco Sport SUVs in the U.S. during the fourth quarter, almost all of them in December. It delivered only three Mustang Mach-E electric SUVs. This model is just beginning to hit retailers’ lots. Finally, the much anticipated Ford Bronco will not be available until this summer.
As inventories for the Bronco Sport and Mustang Mach-E increase in the coming months, sales are moving fast. The Bronco also looks like a guaranteed success, as hundreds of thousands of fans have already made reservations.
Trucks were the problem
The main cause of the sharp drop in Ford sales in the last quarter was the scarcity of F-150s. Ford introduced an entirely new version of the popular full-size pickup for the model year 2021. This meant long periods of plant shutdown last fall and a slow return to normal production rates. In addition, pandemic-related production outages in the spring prevented U.S. automaker # 2 from accumulating as much inventory at the beginning of the year as planned.
Total F-series deliveries fell 15% year-over-year in the fourth quarter, despite strong sales for Super Duty models, which did not have a major upgrade to the 2021 model. F-Series trucks accounted for 39% of deliveries from Ford in the United States in the fourth quarter of 2019, so any weakness has a big impact on the company’s overall results.
More worryingly, sales of the Ford Ranger midsize pickup fell 18% year-on-year in the fourth quarter, despite the abundance of inventory and production capacity.
Bumps are expected
Ford’s domestic sales performance in the fourth quarter is a far cry from the impressive 5% gain General Motors reported last week. The results for the fourth quarter of the Blue Oval will also be terrible compared to the strong profit that GM must report.
This should not be a cause for alarm, however. Major model changes always lead to temporary production restrictions. It always takes a few quarters for sales of a new model to really take off. The first signs suggest that the Bronco, Bronco Sport and Mustang Mach-E will sell well. Demand for the new F-150 is also extremely strong.
The growing sales momentum for these models is expected to make 2021 a year of recovery for Ford, especially as it will face easy comparisons year after year. With all of these key models in mass production by the end of this year, Ford may be using all cylinders in 2022.