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Ford Fusion Could Be the Best-Selling U.S. Car in 2014

DETROIT ( TheStreet) -- Next year, for the first time since 1996, a car made by one of the Detroit Three could become the best-selling car in the U.S.

The Ford (F - Get Report) Fusion is in short supply today, its sales diminished by a lack of inventory. But that is going to change this fall when Ford begins production at its plant in Flat Rock, Mich. The new Fusion line can be expected to produce about 100,000 Fusions annually, supplementing the estimated 350,000 produced annually at Ford's plant in Hermosillo, Mexico.

The Toyota (TM - Get Report) Camry has been the best-selling U.S. car since 2002, according to figures compiled by Edmunds.com. In fact, Camry has been the best-selling car every year since 1997 except for 2001, when Honda (H) Accord was first. From 1992 through 1996, Ford Taurus was first.

"With sufficient capacity we are on the cusp of competing at Accord and Camry volumes," said Ford analyst Erich Merkle. `

This year, Camry has its usual lead. Through July, Camry sales totaled 242,406, while Accord sales totaled 218,367; Nissan (NSANY) Altima sales were 197,321 and Fusion sales were 181,608.

"Nothing is hindering the sale of Accord and Camry right now, but Fusion is having major production and distribution issues," said Kelly Blue Book analyst Karl Brauer. "Once those are fixed, Fusion will likely displace Accord and Camry. It's been a long dry spell in between (Taurus and Fusion), but Ford is going to do it again."

Edmunds.com analyst Jessica Caldwell said Fusion could surpass Camry and Accord, but cautioned that "a car is always hot in the beginning, especially (when) it is the best-looking car in the segment. But sometimes sales levels are hard to sustain." She said Fusion may in fact be benefiting from the shortages because "people want what they can't have."

In July, when U.S. light-vehicle sales rose 14%, Fusion sales fell 12% to 20,522 units, a result of an inability to meet demand. "In some key coastal markets like L.A., San Francisco and Miami, the days to turn is around two weeks, in an industry where it usually takes about two months to move a vehicle," Merkle said.

Through July, retail sales of the Fusion were up 84% in California, including gains of 89% in Los Angeles and 74% in San Francisco. "Keep in mind Fusion was selling at a record pace last year through July, so this isn't because of some fluke that makes the year-over-year comparisons easy," Merkle said.

The mid-sized car segment is the biggest single segment for U.S. light-vehicle sales, accounting for about 24% of sales through July, and it is a segment where every manufacturer has updated its vehicles in recent years.

"They are all new, relatively speaking, so what stands out is Fusion's exterior styling," Brauer said. "The Fusion is compelling in its look. Looks play more of a role in buying decisions than most people want to admit. "

In the segment year to date, Camry sales are down 0.6%, Accord sales are up 19%, Altima sales are up 7%, Hyundai Sonata sales are down 12% and sales of GM (GM - Get Report) Chevrolet Malibu are down 20% to 123,573.

It is important to remember that the segment "is based on folks who are fairly loyal and who are generally practical and pragmatic," Caldwell said. "Auto journalists criticize the blandness of the Camry, but these buyers want something they can trust."

At the moment, Fusion is benefiting from "conquest" sales to people who trade in other brands. But conquest can be difficult, Caldwell said. Historically, 60% of Toyota and Honda owners trade in for the same brand, she said. (The ratio at Ford and GM is in the high 40s.)

Meanwhile, the threat of the new Malibu looms. GM is hastily redesigning the Malibu after the 2013 model flopped. The 2014 Malibu is scheduled to be rolled out this fall, and could provide a domestic competitor to Fusion. "The segment is so hyper-competitive that it's not enough to have a really good car," Brauer said. "(GM) has to execute flawlessly."

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

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