Ford turns fleet business into profit driver. GM, Stellantis want in

DETROIT — A once “dirty” word, and business, in the automotive industry has become a multibillion-dollar battleground for U.S. automakers, led by Ford Motor.

The Dearborn, Michigan-based automaker has turned its fleet business, which includes sales to commercial, government and rental customers, into an earnings powerhouse. And Ford’s crosstown rivals General Motors and Chrysler parent Stellantis have taken notice, restructuring their operations as well.

“There’s much more of an emphasis now on profitability and how fleet can help that,” said Mark Hazel, S&P Global Mobility associate director of commercial vehicle reporting. “[Automakers] are looking at how they strategically go about this. It’s been a very targeted approach with how they deal with fleets.”

Many fleet sales, especially daily rentals, have historically been viewed as a negative for auto companies. They are traditionally less profitable than sales to retail customers and are used by automakers at times as a dumping ground to unload excess vehicle inventories and boost sales.

But Ford has proven that’s not always the case by breaking out financial results for its “Ford Pro” fleet business. The operations have raked in about $18.7 billion in adjusted earnings and $184.5 billion in revenue since 2021.

Such results have led Wall Street to praise the business, as analysts have called it a “hidden gem” and Ford’s “Ferrari,” referring to the highly profitable Italian sports car manufacturer.

“No other company has Ford Pro. We intend to fully press that advantage,” Ford CEO Jim Farley said July 24 during the company’s second-quarter earnings call, in which Ford Pro was the dominant performer.

Fleet sales typically account for 18% to 20% of annual industrywide U.S. light-duty vehicle sales, which exclude some larger trucks and vans, according to J.D. Power.

Part of the opportunity in fleet sales comes from the aging vehicles on U.S. roadways. The average age of the 25 million fleet and commercial vehicles on American roads was 17.5 years last year, according to S&P. That compares with light-duty passenger vehicles at 12.4 years in 2023.

While commercial sales, which are viewed as the best fleet sales, are estimated to be slightly lower this year compared with 2023, both GM and Stellantis have recently redesigned and doubled down on such operations. However, neither reports such results out separately.

“Breaking apart the fleet channel, we see that Commercial sales have been the weakest. And zooming in further, there are just two [original equipment manufacturers] that appear especially challenged: STLA and, to a lesser extent, GM,” Wolfe Research said in an investor note Wednesday.

Meanwhile, Ford’s commercial volumes have increased a “strong” 7% this year compared with 2023, Wolfe said.

While fleet sales data isn’t as available as retail, Wolfe Research estimates Ford is by far the leader in such earnings at a forecast of $9.5 billion this year. That compares with North American operations at GM at $5.5 billion and Stellantis around $3.5 billion, Wolfe estimates.

S&P Global Mobility reports Ford has been the fleet leader for some time. Since 2021, Ford’s market share of new fleet vehicle registrations (categorized by businesses with 10 or more vehicles weighing under 26,000 pounds) has been about 30%. GM, meanwhile, had around 21%-22% during that time, and Stellantis about 9%.

GM, citing third-party data, claims it outsold Ford last year in a segment of fleet sales: commercial vehicles sold exclusively to businesses (with five or more vehicles) and not individual buyers.

Ford, meanwhile, said it counts “all customers who register their full-size, Class 1-7 truck or van under their business,” not just those with five or more vehicles.

Ford claims to lead sales of commercial vehicles, categorized as Class 1-7 trucks and vans, with a roughly 43% share of U.S. registrations through May of this year. That’s up 2.3 percentage points compared with a year earlier, the company said.

The Ford Pro business is led by sales of the automaker’s Super Duty trucks, which are part of its F-Series truck lineup with the Ford F-150, and range from large pickups to commercial trucks and chassis cabs.

Christine Feuell, CEO of Stellantis’ Ram brand, declined to disclose a time frame for achieving that target but said the automaker believes it can do so after completely revamping its operations to focus on better mainstreaming operations for customers and earnings growth through sales and new services.

GM Envolve includes the company’s EV commercial business BrightDrop, which was folded back into the automaker last year instead of it acting as a subsidiary. It didn’t accomplish the growth GM had expected, but EVs have an opening for automakers’ fleet and commercial sales.