Ford Motor Company's Best-Selling SUV Just Got Even Better

Ford's 2017 Escape. Image source: Ford Motor Company.

All Ford Motor Company (F 6.10%) investors know that America's best-selling truck, the F-Series, is the lifeblood of Detroit's second-largest automaker. While that's true, the Escape has undoubtedly been a critical part of the company's impressive rebound since the great recession that brought Detroit automakers near the point of no return.

The bad news, if you can call it that, is that Escape sales are only up 1% through the first 10 months of 2015 -- albeit compared to a very strong 2014 sales figure that topped over 300,000 units in the U.S. and was good enough for the Escape to be Ford's best-selling SUV. The good news is that Ford has given the 2017 Escape a significant midcycle refresh, and it's great timing to take advantage of a red-hot SUV segment. 

A look at the environment
2015 has clearly been the year of the SUV, much to the delight of Detroit automakers that are raking in very strong profits and margins in North America. Year to date through October, sales of crossovers, midsize SUVs, small SUVs, and luxury SUVs are up 17.9%, 15.9%, 8.2%, and 18.2%, sequentially. For comparison's sake, sales of midsize cars, small cars, and luxury cars are down 1.6%, 1%, and 3%, sequentially, during the same time period. 

The trend of strong SUV sales has been gaining steam in recent years. It's been a great scenario for the Escape, which didn't suffer as large a drop in sales as larger SUVs did during the Great Recession because of better fuel economy, as you can see in the graph below.

Chart by author. Data source: GoodCarBadCar.net and Ford sales press releases.

What's new for the 2017 Escape?
Ford's Escape is in the compact SUV segment, which is the largest and most competitive segment in the U.S. market, but the automaker hopes the midcycle refresh of the Escape can drive sales higher. Ford has loaded the 2017 Escape with more driver-assist technologies and new mobile connectivity -- the Escape will be Ford's first vehicle with Sync Connect, which will enable users to unlock doors, check the fuel level, and locate where the vehicle is parked, all from their phone.

Ford's 2017 Escape also offers multiple interior colors and options. Image source: Ford Motor Company.

The new Escape is getting some updates under the hood, as well. The Escape SE and Titanium trim will come standard with the new 1.5-liter four-cylinder EcoBoost engine, and an even more powerful twin-scroll 2.0-liter EcoBoost engine is optional. The latter generates 245 horsepower and 275 lb.-ft. of torque. Furthermore, the Escape is the first Ford vehicle to make Auto Start-Stop standard with either of the engine options.

"Auto Start-Stop is the equivalent of turning off the lights when you leave a room, or turning off a water faucet when you're done washing dishes," said Milton Wong, Escape chief engineer, in a press release. "It's a high-tech approach to more efficient driving."

Ford's even offering the Escape with a new Sport Appearance Package that's available for the SE and Titanium trims, three new colors -- Canyon Ridge, White Gold, and Lightning Blue -- as well as six new wheel designs. Essentially, the Escape is an all-in push for Ford's midcycle refresh on a strategy that has worked well -- improved fuel economy through EcoBoost engines and more technology features and connectivity for consumers.

What's down the road?
At a time when consumers can cheaply finance big-ticket items such as higher-priced SUVs, the Escape is well poised to take advantage of rising SUV sales. SUVs now account for roughly one-third of the U.S. auto industry, and Ford believes that will grow to 40% by 2020. Small SUVs, such as the Escape, hit a sweet spot between baby boomers looking for more capability and millennials just starting a family and needing extra seating and carrying capacity.

Expect 2015 sales of the Escape to top last year's 306,212 units sold in the U.S., and with the new 2017 midcycle refresh, that figure should only move higher in 2016 and beyond. As long as major automakers avoid an incentive war if total sales stall in the U.S. market, Ford's focus on SUV sales should be a very profitable strategy going forward.