North America Still Likes Ford Trucks

+6.18%
Upside
13.28
Market
14.10
Trefis
F: Ford Motor logo
F
Ford Motor

Although consumers increasingly favor small cars, trucks are still an important business for the Ford Motor Company (NYSE:F), particularly in North America. Ford competes with Toyota (NYSE:TM), Daimler (NYSE:DAI), Chrysler, General Motors and other large auto manufacturers.

Based on factors like pricing, market size and sales mix, we value Ford’s North American truck business at about $9.6 billion. The truck business is worth about 50% more than Ford’s North American car business, which we value at roughly $6.2 billion.

Ford’s North American truck business constitutes 18.5% of the $12.92 Trefis price estimate for Ford’s stock, versus 12% for the North American car division. Our analysis follows below.

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Pricey trucks

Ford sells more trucks than cars, at higher price points. Ford sold around 1.1 million trucks and 640,000 cars in North America last year. The average price of a Ford truck is $28,000, compared to $19,000 for the average Ford car.  We estimate that Ford realizes an average profit margin of 14% across all vehicle segments.

You can drag the trend-lines in the charts below to create your own price and margin estimates for Ford vehicle sales and see how they impact the company’s stock price.

Small cars gain in popularity, but Ford still sells lots of trucks

Over the past five years, North American consumer preference has increasingly shifted in favor of small cars. More recently, the slow U.S. economic recovery has depressed demand for commercial vehicles. Based on seasonally adjusted annual rates, 11 million trucks were sold in North America in 2005, versus 9.2 million cars. This year we expect 6.23 million truck sales and 6.62 million sales.

Ford’s sales figures tell a very different story. We estimate Ford’s share of the North American truck market at 17.8%.By contrast, Ford controls only 9.7% of the North American car market. In 2009, trucks accounted for 63.3% of Ford’s total vehicle sales in the U.S. (which is the biggest North American market), versus 36.7% for cars.

Ford cars have gained at the expense of Ford trucks in recent years, prompting Ford to convert three North American truck plants to car production. But we expect trucks to dominate Ford’s vehicle sales in the near future.

You can see the complete $12.92 Trefis price estimate for Ford’s stock here.