Ford Isn't Missing the Ranger
Some of my colleagues here at the Fool have worried that Ford Motormade a mistake by deciding to stop selling the Ranger midsize pickup in the North American market. The Ranger would offer better gas mileage than Ford's full-size F-Series trucks while being easier to maneuver in the city (and cheaper!). Proponents of the Ranger therefore believe that Ford will lose a lot of sales to rivals that still offer midsize trucks, like Toyota Motor .
As I've previously argued, the benefits of bringing the Ranger back to the U.S. are outweighed by the cost of confusing customers and cannibalizing sales of the more-profitable F-Series trucks. U.S. auto sales results for May further justify Ford's decision to kill the Ranger in the U.S. In fact, the results show that there is very little demand in the midsize truck segment.
In May, sales of Ford's F-Series trucks grew by more than 30% year over year and surpassed 70,000 in a month for the first time since 2007. Ford sold nearly 17,000 more F-Series trucks this month than it did last May, easily overshadowing the loss of 1,607 Rangers that were sold in 2012 but are no longer available. For the full year, F-Series sales are up 21.7% and combined sales of the F-Series and Ranger are up 13.6%.
Looking across Detroit, while General Motors had a pretty good month as well, it's clear that Ford is king of the hill. Combined sales of GM's Chevy Silverado and GMC Sierra pickups totaled 59,344, up 24% year over year but still well below Ford's F-Series sales total. GM's pickup sales may be weighed down somewhat by the impending arrival of redesigned 2014 models, but that is being offset by discounts designed to move the old inventory out.
High demand for F-Series trucks bodes well for Ford's profitability this quarter, especially because Ford has boosted sales without high incentive spending. With F-Series sales surging in the U.S., Ford has no real need for a second, slightly smaller pickup like the Ranger.
The midsize truck segment disappears
If Ford's strong gains in the full-size truck segment don't convince you that the Ranger is no longer needed in Ford's vehicle portfolio, take a look at the midsize truck market. Ford, GM (the Chevy Colorado and GMC Canyon), and Chrysler (the Dodge Dakota) have all exited the U.S. midsize truck market in the past two years, although GM is planning to launch a new midsize truck next year.
Despite the disappearance of all those competitors, sales of the segment-leading Toyota Tacoma have remained fairly slow. Last month, Toyota sold just 14,727 Tacoma trucks, which was in line with the sales pace for the past several months. Including the full-size Tundra, Toyota sold fewer than 25,000 trucks in the U.S., a small fraction of Ford's truck sales.
Other small trucks have fared even worse. Nissan sold 6,570 Frontier trucks last month, while Honda Motor only managed to move 1,626 Ridgeline pickups in May. Clearly, most American truck buyers do not miss the midsize trucks that have disappeared very much. Rather than buying the midsize trucks built by Japanese automakers, these customers have opted for full-size pickups, vans, cars, and crossovers.
While Ford continues to grow sales of its F-Series trucks, the midsize truck segment is virtually disappearing in the U.S. Sales of the top three small trucks (Tacoma, Frontier, and Ridgeline) combined were less than a third of Ford's F-Series sales last month! While Toyota is benefiting a bit from Detroit's disappearance from the midsize truck segment -- Tacoma sales were up 20% year over year in May -- the segment as a whole is still shrinking.
The changing dynamics of the U.S. truck market have given a ringing endorsement to Ford CEO Alan Mulally's decision to focus on selling F-Series trucks in the U.S. Rather than offering a cheap, low-volume, midsize pickup that cannibalizes profitable F-Series sales, Ford is directing would-be Ranger buyers to other vehicles in its portfolio. So far, Ford isn't missing the Ranger at all.
The article Ford Isn't Missing the Ranger originally appeared on Fool.com.Fool contributor Adam Levine-Weinberg has no position in any stocks mentioned. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.