The past few years have Ford Motor Company (NYSE: F) revamped its North American model range. The iconic carmaker has stopped virtually all of its sedans and hatchbacks. Meanwhile, the crossovers, SUVs and trucks have doubled, bringing with it a slew of new entries and updated versions of existing models.
This transformation holds many long-term promises. However, this is causing some pain for Ford in the short term. Production disruptions with pandemics exacerbated the challenges. As a result, Ford reported a 10% drop in U.S. deliveries for the last quarter of 2020.
Image source: Ford Motor Company.
Solid results for crossovers and SUVs
Some aspects of Ford’s domestic sales in the fourth quarter were quite significant. Delivery of crossovers and SUVs increased by 4% year-on-year, as an 8% increase in retail deliveries more than offset the fleet’s lower sales. The Ford Explorer performed the strongest, with deliveries in the United States 29% higher year-on-year. While Ford had an easy year-on-year comparison for the Explorer a year ago due to manufacturing issues, the Explorer’s Q4 delivery was also 2% higher than in the fourth quarter of 2018.
Higher sales of cars and sports utility vehicles did not fully compensate for the decline in Ford’s car sales last quarter. However, the new SUV models that could revive Ford’s fortune were not yet widely available. The company delivered 5,120 Bronco Sport SUVs in the U.S. during the fourth quarter, almost all in December. It produces just three Mustang Mach-E electric sport utility vehicles. That model is now just reaching out to dealer parties. Eventually, the expected Ford Bronco will only be available this summer.
As Bronco Sport and Mustang Mach-E’s stock builds up in the coming months, sales will follow quickly. The Bronco also looks like a popular hit, as hundreds of thousands of fans have already made reservations.
Trucks were the problem
The biggest cause of Ford’s sharp decline in the last quarter was a shortage of F-150s. Ford has unveiled a brand new version of the popular full-size pickup for the 2021 model year. This has brought long pieces of factory disruption this past autumn and a slow return to normal production rates. Furthermore, production interruptions with pandemics in the spring prevented the no. US carmaker was able to build up as much inventory as planned earlier this year.
Total deliveries in the F-Series fell by 15% in the fourth quarter, despite strong sales of the Super Duty models, which did not receive a major update for the 2021 model year. F-Series trucks accounted for 39% of Ford’s US deliveries in the fourth quarter of 2019, and any weakness there has a major impact on the company’s overall results.
What’s more worrying, sales of the Ford Ranger center pickup fell 18% in the fourth quarter, despite plenty of inventory and production capacity.
Buttons are to be expected
Ford’s Q4 sales in local market are far from impressive 5% increase General Motors reported last week. The Blue Oval’s revenue from the fourth quarter will also be terrible compared to the strong profit that GM is likely to report.
However, this should not be a cause for concern. Major changes in the model always lead to temporary production constraints. It always takes a few quarters before the sales of a new model really start. The early signs indicate that the Bronco, Bronco Sport and Mustang Mach-E will all sell well. Demand for the new F-150 is also very strong.
The growing sales problem for these models would have to make Ford a setback year for Ford from 2021, especially since it will experience easy year-to-year comparisons. With all these important models in mass production by the end of this year, Ford can shoot on all cylinders in 2022.