Ford's Escape and Explorer Surge Ahead
May 4th 2013 1:01PM
Updated May 4th 2013 7:15PM
This week Ford released its results for April sales report, and -- spoiler alert -- it was really good. It wasn't long ago that the only profitable vehicles Ford produced were the F-Series and gas-guzzling, car-trampling SUVs. It's a new day and age in the U.S., and the consumer has largely changed his tune, demanding smaller and more fuel-efficient rides. Ford is leading the way with very popular smaller rides. Let's take a more in-depth look at Ford's utilities segment and see why its year-to-date sales are up more than any segment.
Models leading the charge
Ford's utility and crossover segment include six different vehicles. Three of those models represent 85% of sales and have helped the segment outpace the car and truck segment with a sales increase of 18.1% YTD versus the prior year. Here's a graph of the top three combined.
I estimated 2013 using the pace set so far this year. You can see that the Escape -- which sold just under 99,000 -- makes up the bulk of the success and is Ford's third best-selling model so far this year. It trails only the massively popular F-Series and Fusion, which have sold 227,873 and 107,820 units, respectively, this year.
Why it matters
So far this year, the car and truck segment have sold nearly the same amounts of vehicles yet represent two different things to Ford. The truck segment represents the majority of Detroit automakers' profits and is all about large margins and high transaction prices. This is especially true since cash incentives have been decreasing for most automakers.
While the car segment is still very profitable in the U.S., it represents how Ford is aiming to take back market share and overall sales volume from rival imports. Toyota and Honda came in with fuel-efficient vehicles, stole the market, and never looked back.
The utilities segment is somewhere in between, while still selling in enough volume to help push the meter on market share -- while bringing home higher margins than smaller vehicles. This segment took a drastic hit when gas prices soared and the recession hit. It's now making a strong comeback, and Ford is positioned with popular models and EcoBoost engines -- allowing the Escape to get 22 mpg city and 31 highway. Consumers are responding and are looking for Ford's market share and profits to increase, as these models continue to sell very well.
Popular Mechanics just released its first ever "Car of the Year" award, giving the inaugural award to the 2013 Escape. The success of the Escape so far is truly only the beginning, as the model is soon to be released in China and Europe. If Ford wants to join rival General Motors and Toyota at the top of the global sales list, it will have to export the Escape's homeland success overseas. The good news is that the initial response to the Escape has been excellent overseas, and we will know in due time if sales success follows its U.S. lead.
As an investor, I place my money in companies that have sustainable and profitable growth. I really like what I see with Ford's opportunities now and down the road. It's proven to make popular vehicles in all segments and has earned numerous awards for its vehicles across its entire brand. I believe this growth is sustainable because of its diversification in the U.S. and its plans to clone its sales success in emerging markets. With Ford's economies of scale, it will continue to drive strong profits, and with successful vehicles, it will continue to drive revenue. I'm just along to enjoy the ride.
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The article Ford's Escape and Explorer Surge Ahead originally appeared on Fool.com.Fool contributor Daniel Miller owns shares of Ford. The Motley Fool recommends and owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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