Ford Motor Company (NYSE:F) said its U.S. sales increased 6.2% in October from a year ago, outpacing a 1.3% decline for the overall U.S. market, on strong sales of pickups and SUVs and some big deliveries to Ford's fleet customers.
Ford's October sales gain handily outpaced results at both of its traditional Detroit rivals. General Motors' (NYSE:GM) U.S. sales fell 2.2% last month, while Fiat Chrysler Automobiles' (NYSE:FCAU) were down 13% from a year ago.
Ford's sales in October: The raw numbers
|Metric||October 2017||Change vs. October 2016|
|Total U.S. sales||200,436||6.2%|
Trucks and SUVs are still powering Ford's U.S. sales
The overall U.S. new-vehicle market may be past its cyclical peak, but Ford's pickup sales show no signs of fading any time soon. Sales of the full-size F-Series pickup line rose 15.9% last month to 75,974.
Ford isn't using fat discounts to boost sales, either: F-Series' average transaction price rose to $47,300 in October, up about $4,000 from a year ago, on high demand for loaded Super Duty and new 2018 F-150 trucks. That increase is especially impressive in light of the fact that a jump in commercial-fleet sales played a role in the F-Series' gain in October.
Here's how the F-Series' result stacks up against Ford's key rivals in the super-profitable full-size pickup segment:
|Truck||October 2017 Sales||Change vs. October 2016|
|- Chevrolet Silverado||53,157||6.8%|
|- GMC Sierra||18,895||25.5%|
Ford also did well with its SUVs, a longtime strength. Sales of Ford-brand SUVs as a group rose 4.6% last month, and 9% at retail, on a big (37%) year-over-year jump in sales of the midsize Edge. Sales of the three-row Explorer rose 5% to almost 17,000, but sales of the big Expedition fell as dealers are awaiting shipments of an all-new 2018 model. Escape sales fell 2%.
Ford's car models did less well in what has been a very soft market for traditional coupes and sedans. As a group, sales of Ford-brand cars were down 0.6% from a year ago. But there were bright spots: Sales of the compact Focus were up 7.8%, its fourth straight monthly sales gain, and the little Fiesta gained 1.1% from a year ago.
Lincoln finally succumbed to the ongoing weakness in the U.S. luxury-vehicle market. After months of bucking the trend, Lincoln sales fell 1.8% in October, on a 20% year-over-year drop in sedan sales.
Ford's inventories are still in good shape
Including vehicles in transit to dealers at month-end, Ford had a 79-day supply in its U.S. inventories as of the end of October. That's up a bit from the 72-day supply it had at the end of September, reflecting increasing shipments of 2018-model-year products and a slower pace of car sales, but it's still below levels that should cause concerns.
High inventories can become a concern for investors for two reasons. First, because automakers book revenue when vehicles are shipped, not sold, high inventories can suggest that the automaker is running its factories at a too-high pace in order to pad earnings. Second, automakers have traditionally resorted to profit-crushing discounts to clear out those excess vehicles.
But neither is a concern here. Ford's inventories have been in good shape all year, and they continued to look on-point in October.
The upshot: Ford remains on course
The bigger picture here is that the U.S. market is past its cyclical peak. With sales growth getting harder to find, automakers have been boosting incentives in hopes of drawing more customers to their showrooms.
Of course, higher incentives mean lower profit margins. Ford's operating margin in North America was 8.1% in the third quarter, a decent result, but lower than the double-digit margins Ford was regularly posting not so long ago.
Last quarter, Ford was able to offset the pressure it's feeling to discount slower-selling sedan models with strong sales of its highly profitable trucks. What we learned today is that those trends were still in place in October. I think they're likely to continue through the fourth quarter and into next year.