Ford and General Motors benefited from growing commercial vehicle demand in the fourth quarter, as software and fleet sales indicate market strength.
Ford Pro, the commercial fleet division of Ford, experienced high-margin growth in the fourth quarter due to strong subscription performance, Ford Motor Chief Executive Jim Farley said on the company’s earnings call on Feb 5. The division’s Q4 revenue totaled $16.2 billion, up 17.4% year over year, while full-year revenue reached $66.9 billion, up 15.1% YoY, according to the Feb 5. earnings presentation.
“Ford Pro is leading this industry in showing large-scale services, both software, almost 1 million subscriptions now, and it’s getting cyclical, so we can start to see the flywheel turn on Pro, and we’re just getting serious about repair of the vehicles,” he said. “Those two attach us to our traditional vehicle is frankly what I’ve been waiting for 40 years to do as a leader for the company and for the industry, and how ironic it is, it’s happening not in the retail world, it’s happening in the Pro B2B space.”
Ford Pro’s Q4 wholesale sales increased to 378,000 units, up 4.7% YoY, while full-year wholesales sales landed at 1.5 million units, up 9.2% YoY, according to the earnings presentation.
Ford Pro’s service profitability represented 13% of Pro’s profitability, but the OEM is targeting 20% from service, Farley said.
GM commercial financing receivables rise
Meanwhile, General Motors’ fleet sales declined 14.3% to 1 million units for the full year, according to the company’s Jan. 28 earnings release. GM North American fleet sales totaled 615,000 units for the full year, down 9.2% YoY, while the company’s overall fleet sales as a percentage of total vehicle sales landed at 16.9%, down compared 19.2% to end 2023
GM Financial’s commercial receivables rose 40% YoY to $19.2 billion, according to the company’s Jan. 28 10-Q filing with the Securities and Exchange Commission. GM Financial also increased its allowance for commercial loan losses to $58 million in Q4, up 61.1% YoY.
Despite the decline in fleet sales and a truck incentives headwind, GM’s maintains confidence in the commercial strategy, Paul Jacobson, executive vice president and chief financial officer, said during the company’s Jan. 28 earnings call.
“While we remain disciplined on pricing, we faced a slight headwind from full-size truck incentives,” he said. “We are executing well on our product launches along with being disciplined on costs, pricing and inventory levels.”
Outlook
As both companies aim to grow their commercial vehicle businesses, subscriptions remain top of the strategy, with Ford Pro seeing sustained growth and margins on Ford Pro Intelligence, Chief Financial Officer Sherry House said during Ford’s earnings call. House was named CFO on Feb. 5.
“Ford Pro Intelligence continues to drive recurring high-margin, non-cyclical revenue,” she said. “Paid subscriptions, attachment rate and monthly average revenue per unit were all up strongly in 2024.”
While not exclusive to commercial fleets, General Motors also sees the benefits of subscription growth, Chief Executive Mary Barra said during the earnings call.
“Subscription revenue is becoming an increasingly important part of the Super Cruise opportunity,” she said. “Within five years, we expect to approach about $2 billion in total annual revenue from Super Cruise.”
Super Cruise is GM’s hands-free driver assistance technology.
Shares of Ford Motor Co. [NYSE: F] were down 7.49% from market open to $9.26 as of market close today. The company has a market cap of $39.78 billion.
Shares of General Motors Co. [NYSE: GM] were up 0.25% from market open to $47.93 as of market close today. It has a market cap of $47.57 billion.
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