Ford (NYSE:F) Driving Lower As June Sales Slip On Lingering Supply Chain Constraints

After rival General Motors (GM) issued a downside Q2 net income and adjusted EBIT last Friday, Ford Motor (NYSE:F) provided a discouraging update of its own today. Specifically, total June U.S. vehicle sales fell slightly from May, coming in at 152,262 vehicles. That represents the lowest total since February when Ford posted sales of 129,273 units. Like GM and many other automakers, Ford continues to contend with supply chain issues, including ongoing semiconductor shortages. In fact, GM’s soft guidance was mainly attributable to the unfavorable timing of semiconductor shipments, causing the company to keep 95,000 unfinished vehicles in its inventory.

With GM also reporting a 15% yr/yr decline in Q2 sales, it’s not surprising that Ford’s sales results for June were disappointing as well. Ford investors have been bracing themselves for some bad news, as illustrated by the stock’s 32% tumble since late April. Therefore, today’s weakness may be more related to mounting macroeconomic concerns than the actual June sales numbers. On that note, there were some notable positives from the report.

The average transaction price climbed by about $1,900 per vehicle on a month/month basis, primarily due to strong sales of higher-priced F-Series, Explorer, and Navigator models. An important component of Ford’s strategy is to focus its sales efforts on its most profitable vehicles. The June sales report shows that the company is succeeding in that mission, which should help to curb inflationary pressures.

Demand for Ford’s electric vehicles remains very healthy with sales surging by 77% in June. Sparked by its popular F-150 Lightning and Mustang Mach-E models, Ford says that it was second only to Tesla (TSLA) in U.S. electric vehicle sales in June. Furthermore, with both F-150 Lightning and Mach-E dealer stock levels higher than last month, Ford is poised for an even stronger July.

Despite rising interest rates, higher cost of living expenses, and vehicle price increases, Ford is still not seeing a material slowdown in overall retail sales. The company stated that the number of retail sales coming from previously placed orders continues at its record pace of about 50% in June.

The main takeaway is that supply chain issues and semiconductor shortages predictably undercut Ford’s sales in June. Looking ahead, semiconductor supply for the automotive industry should improve as chip makers shift their focus away from the slowing PC and smartphone end markets. However, new vehicle affordability is becoming a major concern, especially as concerns about the economy intensify.


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