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Ford sold a lot of high-end pickups like this loaded 2015 F-150 Platinum model in April. That will help Ford's profits while it continues to ramp up production of the new trucks. Source: Ford Motor Company.
April was a good month for Ford Motor Company and its market-leading F-Series pickups. The Blue Oval sold 62,827 full-size pickups in April, a nice number given that supplies of the all-new F-150 are still tight.
But old archrival General Motors also had a good month. Added together, sales of GM's full-size Chevy Silverado and GMC Sierra totaled 64,060, beating Ford. On top of that total, GM sold an additional 9,442 units of its new midsize Colorado and Canyon pickups.
So, who's beating whom in the pickup sales wars? There's a good case to be made that both GM and Ford are winning, in different ways -- and that's a big deal for investors. Read on.
F-150 supplies are tight, but the new truck is already generating big profits
Ford's Kansas City truck factory is still ramping up to full speed after a shutdown to retool for the all-new F-150. That means that Ford's dealers still onlyhave limited supplies of the new trucks. But the ones that are getting to dealers are selling quickly, and at great prices. Ford said that the heavily optioned Lariat, King Ranch, and Platinum versions represented 60% of the new F-150's retail sales in April.
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Translation: Big profits for Ford on each truck sold. That's crucial for Ford, because it won't have full supplies of the new trucks until summer -- and the F-Series is the biggest contributor to Ford's global bottom line.
Right now, Ford dealers are selling a mix of leftover 2014 models and new trucks. Ford already booked the profits on those 2014 models, so getting good prices for the limited number of 2015 models it's shipping now is crucial.
Fortunately, that's happening. But those short supplies still hurt: Ford CFO Bob Shanks said this week that wholesale shipments of the F-150 in the first quarter were down about 40% from where they were a year ago. Had they been at full speed, and had the all-new Edge also been ramped up, Ford's profits would have been over a billion dollars richer, he said.
Like other automakers, Ford is also getting some help from SUV sales. SUVs tend to be more profitable than equivalent car models, so the market's shift away from sedans and toward crossover-type SUVs is boosting profits for lots of manufacturers, including Ford. Sales of the Explorer are up over 17% so far this year. And Ford's all-new Edge has begun arriving at dealers, propelling that model to a 77% year-over-year gain in April.
A boom for GM's pickups -- and its new big SUVs.
GM doesn't have the supply constraints that Ford does, at least on full-size pickups. And GM has taken good advantage of Ford's production issues. Sales of the Chevrolet Silverado rose 7.5% in April, giving the truck a year-to-date gain of almost 15%, while the upmarket GMC Sierra was up 5%.
The new Chevy Colorado had its best month yet in April. Source: General Motors.
But where GM is really winning is in commercial fleet sales: Deliveries of GM's full-size pickups to commercial customers were up 42% in April, the company said. That's happening in part because Ford is prioritizing deliveries of its new 2015 F-150 to retail customers while supplies are short. Unlike sales to rental-car fleets, commercial fleet sales are good profitable business, and GM is happy to capture more of it while Ford's supplies are tight.
GM is also making a lot of hay in SUVs. Its big SUVs, the Chevy Tahoe and Suburban and their upscale GMC and Cadillac siblings, are all-new for 2015 and sales have been terrific -- so terrific, in fact, that GM's factory in Arlington, Texas, is maxed out. (GM is expected to announce a big investment to expand the Arlington factory's capacity soon.) GM's car-based crossover SUVs are also booming: Sales of the group rose 25% last month.
These are all solid gains that could help GM improve on its good first-quarter results in its North America region. But the good news runs deeper than that. GM is getting those sales gains without resorting to the big discounts it used to rely on back in the bad old days. GM said that its incentive spending in April, expressed as a percentage of its average transaction prices, was 9.5%, down 0.6 percentage points from a year ago and only slightly ahead of the industry average 9.2%.
Conditions are ripe for big profit gains in Detroit
A combination of lower gas prices and shifting buyer preferences (away from cars and toward SUVs) has proven to be a boon for both Ford and GM. Sales of both pickups and SUVs have been exceptionally strong for both -- and those sales are coming at strong prices that maximize both automakers' profits per sale.
We saw a similar situation unfolding 10 years ago, of course -- and both automakers got burned when gas prices spiked and buyers shifted back toward cars, where Detroit's products were weak. Things are different now, in that both Ford and GM have car lineups that are both competitive and profitable. If the market shifts again, both are well prepared.
But there are big profits to be made in the current market, and both Ford and GM are doing a good job of maximizing their gains right now. That should be very good for investors in both companies' stocks as the year goes on.
The article Ford's New 2015 F-150 Is Selling Fast, but So Is GM's Chevy Silverado originally appeared on Fool.com.
John Rosevear owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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