Chrysler, Dodge and Honda (NYSE:HMC) have dominated the kid-friendly, family packed car for the past few years. The minivan - dubbed the "soccer mom" ride - is something that Ford (NYSE:F) abandoned years ago, in 2007, opting instead to focus on the SUV market such as the Ford Explorer and Ford Escape. But that's all about to change, with Ford looking to enter the minivan sector in late-2013. Before we dig into any of the details, lets make sure we keep things straight here; Ford wants it clear this is not a minivan, but rather, a hybrid sport utility vehicle, called the Transit Connect Wagon.
David Mondragon, General Manager of Marketing for Ford, had this to say on the matter, "It's anything but a minivan. In our mind, it's a people mover. We think of it as more of a utility, or kind of a hybrid sport utility, than a minivan."
To get more of an understanding on why Ford may be looking to get back into the market of "people moving," let's take a look at how the top three minivan makers have fared this year. Below is a chart, with October's sales results, year-to-date sales totals, and year-to-date percentage change:
|Minivan||October 2012 (sales)||Year To Date (sales)||Year To Date % Change|
|Chrysler Town & Country||8,281||95,850||+22.5%|
|Dodge Grand Caravan||10,603||118,730||+27.8%|
While the above table shows each of the top three minivan makers are enjoying a nice 2012, why Ford decided to get out of the minivan business in 2007 was a no-brainer. Ford, along with the three above mentioned models, have seen declining sales since 2002. Below is a table, including Ford, with how U.S. sales did from 2002-2009:
|Year||Town & Country||Odyssey||Grand Caravan||Ford Windstar/Freestar|
*Ford stopped producing its Freestar model in 2007.
Furthermore, included below, are Ford's minivan sales in the years prior to 2002, more specifically 1999-2001.
|Year||Ford U.S. Sales|
For our last chart, we're going to look at the percentage change from each year in Ford's U.S. minivan sales. The table will chart from 1999-2006 and it quickly becomes obvious as to why Ford stopped making the Windstar and Freestar models.
|Year||Ford U.S. Minivan Sales||Change In Sales (Units)||% Change From Previous Year|
It's safe to say the minivan business is a falling trade, something that may have investors wondering why Ford would dare venture back in, with such successes after moving out. After all, the minivan business only attributes to about 4% of all annual U.S. car sales. But with Ford having such a strong grip on the pick-up truck market, controlling 33% of October sales with its F-Series, it looks as though diversification is key. For more on the Ford and its F-Series, along with a bullish options play, click here.
Ford, as many may not know, already produces and sells the Transit Connect Wagon, and has since 2010. It's main purpose is more commercial based however, with current sales around 35,000 units annually within the U.S. But with minivan sales peaking in 2000, with 1.37 million models sold, while only 472,398 models sold last year, I myself wonder if this is the right move for Ford going forward.
Personally, I don't think it's a game-changer, but I think it's a step in the right direction. Of course Ford can always look to take away market share in other niche areas, like minivans, while still remaining successful with the F-Series, Escape and Focus doing most of the heavy lifting. Ford estimates those sales to double for the Transit Wagon, up to 70,000, with half of the buyers remaining as commercial drivers and taxi companies.
Below is a table with the more recent sales of minivans for the current, three best selling models based on U.S. sales from 2009-2012:
|Year||Town & Country||Odyssey||Grand Caravan|
While minivan sales aren't quite what they used to be, it is clearly on the upswing when you look at the chart above. One can see that while sales aren't blowing away numbers by any means they are moving in the right direction, and so far for 2012, with sales figures only through 10 months of the year, each model has already outsold the previous year, 2011. Perhaps this recent upswing is one of the reasons that Ford is looking to get back into the minivan business, even if they refuse to call it a minivan.
Now is as good of time as any for Ford to attempt a minivan comeback. While I think they made the right decision in abandoning the Windstar and Freestar models in 2007, I think the recent sales from minivans are promising. Since Ford already produces a "commercial minivan," making a transition into the family minivan sector should make the task easier.
It is estimated that Ford's new minivan model will run on a four-cylinder engine or an optional 1.6 liter EcoBoost. While a majority of its current sales are equipped for 7-passenger seating, Ford will include a 5-passenger option as well, which makes up about 15% of current Transit Connect sales.
Aside from multi-passenger seating and different engine options, something most minivan makers can already offer, what's going to truly set Ford's new model apart from the rest? The Transit Connect Wagon will get at least 30 mpg, better than any other minivan on the road today. The Honda Odyssey comes close, with 28 mpg highway, but Ford plans on having at least 30 mpg, and potentially more, for its new model.
When considering purchasing a car, the other factor besides fuel efficiency is none other than, price. Though there has been no official word on the cost of the Transit Connect Wagon, it's estimated that it will be on the lower end of the current market. The Dodge Grand Caravan currently starts at just under $20,000, a price range Ford will likely look to enter as well.
While I don't think that this new model will push Ford over the hump and separate them from the pack, I do think it will help diversify its product line. There will always be parents looking for family vehicles and even though I don't think Ford will overtake any of the current top three minivan makers, it will still take market share and potentially lead to future sales in other models. Ford already makes quality vehicles and dominates the pick-up market, with hearty sales from the Focus and Escape models contributing to its success as well. I am long and bullish Ford on a fundamental and technical basis.
Disclosure: I am long F. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I am long Ford via long dated, deep-in-the-money call options.