DETROIT — Don’t ring the alarm bells over Ford Motor Co.’s high reliance on sales to government, commercial and rental fleets in the first quarter, sales chief Mark LaNeve said Thursday on the company’s quarterly sales call with analysts and reporters.
LaNeve, Ford’s vice president of U.S. marketing and service, said Ford saw strong demand from all three channels of its fleet business in the first quarter, but overall, he said, total yearly sales to fleets for 2019 would be about the same as last year.
“Our rental business can be very lumpy month-to-month as we respond to when our customers want to take delivery. That increase is usually a result of timing. As in previous years, it will smooth out over the balance of the year. And our plans are to end 2019 down slightly in the rental channel,” LaNeve said on the call.
Ford’s total first-quarter U.S. sales fell 1.6 percent to 586,956 light vehicles. The overall market declined 3.2 percent to 3,989,468 delivers.
According to Cox Automotive, 19 percent of Ford vehicles were sold to rental car fleets last month, while government and commercial buyers bought 20 percent of Ford’s vehicles. At least two of the three commercial channels are profitable, says LaNeve.
“A ton of that commercial business is very close to retail. They’re units dealers sell out of stock or ordered units sold one at a time to small businesses.”
LaNeve said commercial and retail can be hard to distinguish because, for example, many customers who buy five vehicles buy them one at a time over the course of a year.
“Commercial and government are very profitable channels, and we saw strength in Q1 with healthy year-over-year increases,” LaNeve said.
Ford chief economist, Emily Kolinski Morris, also on the call, said the first quarter of each year is usually a tough one for retail sales.
“There is a lot of volatility month-to-month on retail. If there was one quarter on which I would not want to call the full year, it would be the first quarter, especially on retail. It’s always the smallest volume, and you can get a lot of volatility. Take the first quarter with a grain of salt,” she said.
“Our fleet business is very important, especially to the rental car companies. We are going to manage it to a relatively flat year-over-year volume level. But the order intake from our government and commercial customers is very solid,” said LaNeve.
For the year, Ford is anticipating overall industry sales, including medium- and heavy-duty trucks, to be in the low 17 million range, Kolinski Morris said. She and LaNeve cited interest rates that are expected to stabilize, the stock market’s rebound helping consumers feel good about their 401K retirement accounts, continued strong job growth, wages, and the overall strength of the economy.
Said LaNeve: “The tailwinds we believe we have are that consumers are in great shape, if you simplify a lot of the data. If people have a job and some level of income growth or some prospect of employment and income growth, they tend to buy vehicles. That’s really simplistic, but I’ve seen it work that way over many cycles.”
“Any favorable view we have of the market is because of sales into fleets,” said Zohaib Rahim, manager of economics and industry insights at Cox Automotive, told Bloomberg. “The market peak of 2016 is behind us and retail sales are softening more and more now.”