Americans have long had a love affair with big, road-hogging, gas-guzzling SUVs, and some still do. However, nowadays, it's more unusual to see a big SUV as more consumers are opting for the smaller crossover and utility vehicles, such as Ford's (NYSE:F) 2014 Escape. Its modern and aggressive styling in combination with its EcoBoost engine providing 22 MPG in the city and 33 highway has been a huge hit with consumers, sending sales through the roof.
The Escape is changing consumer attitudes about small utilities, and its sales are proof. The Escape is the first-ever small utility to break the 150,000 vehicle sales mark through the first six months of the year, according to Ford. In fact, that pace will allow it to top over 300,000 sales for the year, which hasn't been done by any other Ford vehicle, aside from the F-Series, in more than nine years.
"The Ford Escape's great performance, standout design, and outstanding fuel economy are bringing new buyers into the showroom," said Amy Marentic, group marketing manager of global cars and crossovers, in a Ford press release. "It's great to see Escape break new ground, which shows we are listening to customers and delivering competitive global vehicles."
Sales of the Escape are up 20% through July, ranking it in the top 10 best-selling vehicles in across the U.S. market. It's managed to outsell the Honda CR-V and Toyota RAV4 through the first half of the year. Digging further into the story, its CR-V and RAV4 rivals typically dominate sales on the coastal cities, but the Escape has witnessed its retail registrations increase 33% on the coasts -- three times more than the segment itself.
Why the hype?
For the new model year, the Escape has a few technology additions and remains a safe and agile ride, which has resonated well with consumers. The Escape now offers a backup camera and SYNC infotainment system on all trim levels. Its premium trim price, the Titanium, has been lowered to help offset all the premium options that can make it a bit pricey -- although consumers don't seem to mind paying.
As for the agile ride mentioned, its engineered torque converter and revised gear ratios give it a more balanced feel during all driving situations. In addition to the smooth ride and new tech features, another selling point is its safety features, which include a Blind Spot Information system that displays an alert in the mirror if a vehicle is detected in the Escape's blind spot. That's just the tip of the iceberg with the new Escape, but it's been very well received by critics and consumers alike.
What's even better than increasing sales and revenues from the Escape is that top trade-ins for the Escape are from Honda and Toyota owners, helping Ford regain lost market share from its Japanese rivals. The Escape sales are also taking off in one of China's hottest segments: smaller crossover vehicles. Ford figures that will help reach its goal of doubling its market share in China to 6% by 2015, a goal well on its way, as Ford has improved to 4.3% in the second quarter.
Crossovers aren't as profitable as full-size pickups, but they are more profitable than regular passenger vehicles, and with premium options that many consumers pay for, they can become very profitable quickly as transaction prices rise.
The Escape is also part of Ford's branding push, and it's changing consumer attitudes for the better about fuel-efficient crossovers. It's also part of Ford's push in what it calls the "super segment," which will represent fast-growing segments and the best way to gain share in the U.S. market. Ford's Fusion, Focus, Escape, and Fiesta represent vehicles positioned in each of the four hottest segments.
One thing most investors forget is that Ford will take what it learns from the Escape and translate that into a very profitable luxury Lincoln vehicle in the near future. Lincoln's revival will bring incremental sales and revenues as those vehicles don't directly compete with its Blue Oval vehicles. Ford will continue to increase its share price as vehicles like the Escape sell well overseas, but it would be a huge positive catalyst if its Lincoln line surges in sales. One thing is for sure: Ford has much growth remaining, and its momentum is building after a strong two quarters into 2013. It remains a solid investing option during the automotive industry's rebound.