Ford Motor Co.'s Sales in Europe Edge Higher, but Can It Save Q2?

Despite recent improvements in the automaker's bottom-line results, the second quarter might not be as pleasant.

Daniel Miller
Daniel Miller
Jun 16, 2017 at 2:32PM

One of the more pivotal factors in Ford Motor Company's (NYSE:F) second quarter will be its results out of Europe as the negative impacts from Brexit start increasing. Of course, Ford's doing its best to offset the bottom-line impact by cutting costs where possible and focusing on sales of more profitable vehicles, which is why paying attention to its sales could be particularly helpful this quarter. It's these types of near-term speed bumps that caused General MotorsĀ to exit Europe entirely.

Let's take a look at Ford's May sales results and see if there's anything for investors to glean.

By the numbers

In its traditional 20 European markets (Euro 20), Ford's total sales moved 6% higher compared to its prior-year result, up to 118,000 units. But that wasn't enough to gain ground on the industry, as its total vehicle market share took a slight step back, down 10 basis points to 7.4%. Ford's total vehicle sales break down into two distinct categories: passenger and commercial. On the bright side, Ford's passenger sales managed to post a 3% gain over the prior year to 88,200 units. What that essentially means is that Ford's SUV sales were able to offset the weakness in its passenger cars -- something that doesn't occur every month, as its SUV sales only made up about 21% of its passenger car sales in May.

Roelant de Waard, vice president of marketing, sales, and service for Ford of Europe, explained in a press release:

The trend of strong Ford SUV sales continued in May, with Kuga, EcoSport and Edge up a combined 17 percent. The Ford Transit lineup and Ford Ranger continued their leadership in the commercial vehicle market in May as well, supporting our total vehicle sales increase of 6 percent and market share growth in three key European markets.

A red Ford Fiesta parked against a nighttime urban backdrop.

Despite rising SUV sales in Europe, Fiesta remains Ford's best seller. Image source: Ford Motor Company.

What we learned

One of the takeaways is that Ford's focus on higher-margin vehicles will help a little bit. Its high-series vehicles -- which include Titanium, Vignale, ST-Line, ST, and RS -- generated 63% of its passenger vehicle sales in the Euro 20. That's up 300 basis points from the prior year and suggests that consumers in Europe are still willing to pay more for premium options and trims, which bodes well for the bottom line.

Another thing that many investors overlook is the success of Ford's commercial sales, which jumped 16% in May compared to the prior year, to 29,800. That takes Ford's commercial vehicle market share to 13.3% -- a much more dominant share than its passenger vehicle segment, and it makes Ford the top commercial vehicle brand in Europe. This is a good business for the automaker, and speaking broadly, any time sales jump this significantly, it helps the bottom line.

But here's a different bottom line: Ford's salesĀ were down 11% in April as its passenger vehicle segment dropped 13%. And while the automaker continues to improve its sales mix, cut costs, and trim overhead, there's only so much that can be done as the consequences of Brexit begin to hit with more force. We'll have to see how this plays out next month during Ford's second quarter, but it'll be a pivotal region for the company either way.