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Why Ford's Plan to Move On From Sedans Is Risky

By John Rosevear – Updated Sep 17, 2019 at 5:32PM

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Ford's SUV-heavy plan is a solid one, but it comes with a risk.

Ford Motor Company (F -2.35%) is gearing up to launch an all-new -- and quite different -- version of its signature compact SUV, the Escape. The new-for-2020 Escape loses the outgoing model's boxy profile, with softened lines that make it look less like a brawny SUV and almost like a high-riding version of Ford's now-departed compact Focus.

That's not an accident. The new Escape is an important piece of Ford's plan to move on from sedans in order to boost its profit margins, without losing too many of its loyal sedan buyers. That plan is key to the investment case for Ford, but -- as we'll see -- it's not without risk.

A red 2020 Ford Escape, a compact crossover SUV, on a mountain road.

Ford's all-new 2020 Escape is more rounded and car-like than its predecessor. Image source: Ford Motor Company.

The new 2020 Ford Escape is a change-up 

Ford is eager to tout the improvements it baked into the all-new Escape, and it's a solid list. The new model is roomier inside than the outgoing version, while being 200 pounds lighter. There's good legroom in the back seat, plenty of cargo space, all of Ford's latest electronic safety aids, and even a new hybrid version. (A plug-in hybrid Escape will arrive in about a year.) 

A woman moving the backseat of a red 2020 Ford Escape.

Ford added space inside the new Escape while reducing its overall weight. Image source: Ford Motor Company.

But it's the look of the new Escape that is the most striking change. Like the outgoing Escape, the new 2020 model shares components and engineering with Ford's compact Focus, in this case the all-new Focus that the Blue Oval has launched in Europe and China. But this time, Ford hasn't hidden the Escape's roots: If it looks almost like a jacked-up Focus, that's because it is a jacked-up Focus, more or less.

Of course, Ford will say that there are lots of small differences between the new Escape and its latest Focus, and that's true. But both are based on Ford's flexible C2 platform, and it's a useful way for us to think about how Ford is positioning the new Escape. You can't get a new Focus in the United States, but if you liked the old Focus, you might like this new Escape, too. 

But isn't Ford losing something important here?

Of course, by taking some of the visual SUV-ness out of the Escape, it seems like Ford is running the risk of losing some buyers who want a bit of brawniness in their compact crossover SUVs. It probably is -- but Ford has a plan for them, too: A "baby" version of Ford's upcoming truck-based off-road SUV, the Bronco, is in the works.

We don't yet know the "Baby Bronco's" official name (it might be "Maverick"). But we do know that it will also be based on the C2 platform, it'll probably be built at Ford's Hermosillo, Mexico factory alongside other C2-based vehicles (like the new Transit Connect), and it'll arrive late next year or early in 2021.

We also know, thanks to a leak from a Ford dealer meeting last year, that it will look something like this.

A teaser image showing a brawny small Ford SUV in shadows.

Ford's upcoming "Baby Bronco" might be called the Maverick when it arrives next year. Image source: Ford Motor Company.

It's all about improving Ford's profit margins

Here's the point: Ford is essentially replacing the old Focus and Escape with the new Escape and the Baby Bronco, two vehicles that together will deliver a higher profit margin than the two they will replace.  

It's a good plan, in theory. But there's a wrinkle: The new Escape starts at $26,080, which is about right for a compact crossover SUV, but it's a lot higher than the $21,415 starting price of the late Focus. If that's too much for you, your choices right now are either the small (and mostly unloved) EcoSport at $21,090 before incentives, a Fusion sedan for $24,165 -- or to buy something other than a Ford. 

The risk is that at some point, customers will balk at Ford's rising prices. Low interest rates and longer loan terms have helped Ford sustain higher average transaction prices for several years now. Will consumers continue to be willing to pay up indefinitely? We'll find out over the next few years.

John Rosevear owns shares of Ford. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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