Ford Motor Co. has reported an 8.9% year-over-year drop in U.S. sales for February 2024, primarily attributed to declining rental demand, aging inventory clearance, and temporary production halts at its Kentucky plant. The decline comes at a time when the U.S. automotive market is experiencing fluctuations, and looming 25% tariffs on Canadian and Mexican goods add further uncertainty.
Key Factors Behind Ford’s Sales Decline
- Lower Rental Demand: Ford’s fleet sales to daily rental companies saw a dip compared to the previous year, contributing significantly to the overall sales decline. The company expects rental demand to pick up in Q2, potentially mitigating some losses.
- Production Adjustments: Ford paused production at its Kentucky Truck Assembly plant to retool for the next-generation Ford Expedition and Lincoln Navigator. This temporary shutdown affected supply and sales, with Expedition sales plummeting 48% and Navigator sales down 17%.
- Model Discontinuation and Inventory Strategy: The discontinuation of the Edge crossover and Ford’s strategic effort to reduce excess inventory also impacted sales figures. The company aims to maintain a leaner supply, with a target to bring inventory levels below 60 days by mid-year.
Mixed Performance Across Vehicle Segments
- F-Series Trucks Shine: Despite the overall decline, Ford’s F-Series trucks performed well, with a 14% increase, including a 7% rise in Super Duty sales. This marks the best February and year-start for Ford pickups since 2004.
- EV and Hybrid Sales Grow: Ford’s electric vehicle (EV) sales climbed 15%, while hybrid sales surged 28%, setting a record for electrification. The Mustang Mach-E saw a 13% increase, though the all-electric F-150 Lightning fell 15%.
- SUV Sales Struggle: Internal combustion engine (ICE) models, which still account for 86% of Ford’s sales, suffered a 13% decline. SUV sales dropped 24%, with key models like the Explorer (-23%) and Bronco Sport (-6.3%) struggling. The Bronco, however, bucked the trend with a 20% increase.
- Lincoln Brand Underperforms: Ford’s luxury brand, Lincoln, saw an overall 21% decline, with all models reporting lower sales. The Nautilus (-27%) and Aviator (-30%) were hit hardest.
Impact of Potential Tariffs
A significant concern for Ford is the potential 25% tariff on goods from Canada and Mexico if trade negotiations with the U.S. administration fail. CEO Jim Farley has warned that such tariffs could have an unprecedented negative impact on the U.S. automotive industry. Ford manufactures several key models, including the Maverick, Mach-E, and Bronco Sport, in Mexico, while also relying on Canadian and Mexican plants for engine production and electric powertrain components.
Outlook for 2024
Ford’s leadership remains cautiously optimistic, anticipating improved market conditions in the second quarter as rental demand rebounds and production stabilizes. CFO Sherry House noted that half of the company’s Q1 sales will be 2025 models, positioning Ford for a stronger second half of the year. Additionally, incentives such as free installation of Level 2 home EV chargers under the Ford Power Promise program aim to drive EV adoption and boost sales.
While Ford grapples with short-term challenges, including supply constraints and trade uncertainties, its commitment to electric and hybrid expansion signals a strategic pivot to future growth. The industry will closely watch Ford’s next moves as it navigates market shifts and geopolitical risks in the months ahead.
Competition Heats Up
Meanwhile, competitors like Hyundai, Kia, and Subaru have reported sales increases, highlighting the intensifying competition in the market. General Motors and Stellantis are set to release their Q1 sales data next month, which will provide further insight into industry-wide trends.
With tariff decisions looming and evolving consumer preferences, 2024 is shaping up to be a pivotal year for Ford and the broader auto industry.
