Ford Famously Ditched Sedans Years Ago. This Is Why It's Time to Reconsider.

Years ago, when Ford Motor Company (NYSE: F) stopped producing sedans in the U.S. (other than the prized iconic Mustang, if you count that), it was a fairly logical move. At one time, the sedan market accounted for 50% of new-car sales, but that share has consistently declined to the mid-teens as America's appetite for larger SUVs and trucks has increased. At the time, Ford's profitability on sedans was questionable, so moving production capacity and capital investment to larger, more profitable vehicles made sense.

Fast-forward to today, and things have changed yet again. Ford is planning to get back into the sedan segment in the U.S., but why, and what does that mean for its bottom line?

Image source: Ford Motor Company.

What's going on with Ford?

Ford spent many years away from producing lower-average-transaction-price (ATP) and more affordable compact cars, such as the Fiesta, Focus, and Fusion, in favor of higher-margin SUVs. That worked really well for Ford, and the company would go on to produce some of its most profitable years on record, including 2015, which was its all-time peak in net income driven by -- you guessed it -- surging F-Series and SUV sales.

Things have changed again, thanks in part to rising gasoline prices, but more importantly, new-car prices are hovering near $50,000 on average. That's created a U.S. consumer base screaming for more affordable options, opening the door for the folks at the Blue Oval to reconsider segments left in the rearview mirror.

What's Ford's plan?

Here's what Andrew Frick, the president of Ford Blue and Model e, told Automotive News:

We have a really great Mustang that people consider a car. We look to expand on the Mustang family as we move forward. I think, for us to do it, it's going to have to make sense within our portfolio. It's going to have to make sense within a family that we may already offer. And it's going to have to be very cost-effective for us to do it.

It's important for investors to note that Ford isn't flipping the entire playbook. In Ford's attempt to attack the affordability crisis, it plans to launch five new vehicles priced below $40,000, and yes, one of those will be a traditional four-door car. It's possible the new sedan will be an all-electric four-door built on the company's Universal EV Platform, which will significantly reduce costs and enable better profitability at price ranges that were historically very challenging.

What it all means for investors

For investors worried about margin pressure due to reentering the sedan market, it shouldn't be the concern it once was. Ford is targeting 8% adjusted EBIT (earnings before interest and taxes) margins by 2029, up from about 3.6% in 2025, as the company phases out less profitable models, increases the usage of its Universal EV Platform, grows scale with upcoming higher-volume and more affordable EVs, and more broadly brings down structural costs to be more in line with competitors.

The U.S. auto consumer is demanding more affordable options, and the market for sedans remains, creating an opportunity for Ford to adjust its product portfolio and find equilibrium while improving profitability. These are all good things for long-term investors.

Daniel Miller has positions in Ford Motor Company. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.