Commercial Cool

Ford Motor Company has turned its fleet business, which includes sales to commercial, government, and rental customers, into an earnings powerhouse in recent years, CNBC reported. Once a “dirty” word in the industry, fleet sales have recently become a multibillion-dollar battleground for U.S. automakers.

Many fleet sales and especially daily rentals have historically been viewed as a negative for auto companies. And as a less-profitable alternative than sales to retail customers serving at times to unload excess inventories and boost sales.

But Ford’s “Ford Pro” fleet business is now proving that’s not always the case with operations that have taken in about $18.7 billion in adjusted earnings and $184.5 billion in revenue since 2021. This success has led Wall Street analysts to praise the business, with some calling it a “hidden gem” and even Ford’s “Ferrari,” a comparison to the highly profitable Italian sports car manufacturer.

It would also seem like an interesting expansion of Ford’s overarching retail brand reputation as a provider of durable and reliable vehicles, largely in the truck category. And as a new possible source of appeal for the automaker’s target retail audience, which would appear to skew somewhat male and suburban or rural within the US.

For one thing, the rigorous daily use that commercial fleet vehicles undergo could serve as a visible proof point for Ford’s “Built Proud” reputation among retail customers. Additionally, the potential for fleet operations to serve as testbeds for technological advancements might add further weight to the utility-grade image of many of Ford’s retail trucks and other vehicles.

In a February 2024 earnings call, Ford CEO Jim Farley urged Wall Street to forget about Tesla and its full self-service driving (FSD) driver assistance systems as the future of the auto industry. And instead focus on the Ford Pro business. He compared the Ford Pro unit to where Deere & Co. was seven years before, after which its stock increased by about 235%.

In addition to the traditional fleet and commercial lines, Pro is also home to Ford’s emerging telematics GPS vehicle tracking, logistics, and other connective operations for business customers. These clients range from local plumbers and electricians to massive corporations. The unit is also home to parts, accessories, and services for commercial, government, and rental customers.

Ford Pro sales are led by the automaker’s Super Duty trucks, part of the F-Series lineup with the F-150. But Pro also includes transit vans in North America and Europe, as well as all sales of Ranger midsize pickups in Europe.

Super Duty ranges from large pickups to commercial trucks and chassis cabs used for emergency response, towing and plowing, and construction or utility work.

In 2023, the Super Duty lineup received a redesign that leaned on new software and connected data for tracking maintenance needs, vehicle locations, driver behaviors, wasted idle time, and other metrics. As well as capabilities for setting operation times that would prevent vehicles from starting outside of approved windows.

These software and data capabilities helped lay the groundwork for subscription-based businesses and recurring revenue opportunities for Ford. Opportunities that had traditionally been the domain of third-party companies. Ford aims to achieve $1 billion in sales of software and services in 2025, led by its fleet and commercial business.

Automakers including Ford also see fleet operations as a key driver in other ways. Including for electric vehicle sales. While the upfront investment for EVs can be high for many commercial customers, it’s been argued the eventual payback could be worthwhile for some.

All three legacy Detroit automakers have been touting such advantages to their fleet customers while also still offering vehicles with traditional internal combustion engines.

Overall, adoption of EVs has not occurred as quickly as many had expected. In March 2024, CNBC reported that automakers from Ford and General Motors to Mercedez-Benz, Volkswagen, Jaguar Land Rover and Aston Martin were scaling back or delaying their EV plans.

Even Tesla, the U.S. electric vehicle leader with an estimated 55% of EV sales in the country, was bracing for the possibility of a “notably lower” rate of growth as of late January 2024.

Both Ford and Stellantis, makers of Ram and the “Ram Professional” unit, which competes with Ford Pro, have started highlighting portfolios of alternative powertrains in response to these EV-related delays. These include both hybrids and plug-in hybrid electric vehicles.

Ford and other automakers haven’t entirely abandoned electric vehicles by any means, however. In July 2024, Ford announced plans valued at about $3 billion to expand Super Duty production. Including to “electrify” Super Duty trucks.