Sales of the all-new 2015 Ford F-150 have been extremely brisk despite tight supplies. Ford dealers will have more of the popular trucks to sell soon. Source: Ford Motor Co.
Ford said on Wednesday that its U.S. sales rose 2% in June, as strong retail demand for its revamped Edge and Explorer SUVs helped the Blue Oval keep pace with rivals.
But while rival General Motors' full-size pickups made strong sales gains in June, sales of Ford's market-leading F-Series fell almost 9%.
The F-Series is the biggest single contributor to Ford's bottom line. Is it time for the automaker's investors to worry about the new truck?
Believe it or not, this is all going according to planThe short answer: not hardly.
In a nutshell, Ford's sales are down because supplies are tight, and GM's sales are up because it's grabbing more commercial fleet business while Ford is prioritizing retail sales.
That's not a bad thing for GM. While "fleet sales" carry a bad rap with investors, sales of trucks to commercial buyers such as contractors and miners are good, profitable business. Ford and GM compete hard for it, and Fiat Chrysler would like more of it.
But it's the right move for Ford to prioritize retail sales at a moment when the company has tight supplies of a hot new model. Ford has been building more of its higher-end "loaded" models, and they've been flying off of dealers' lots with minimal discounts.
That means while Ford's overall pickup sales are down, the company is making a lot of money on each truck it does sell. Ford U.S. sales chief Mark LaNeve said on Wednesday that the average transaction prices on the F-Series hit an all-time record in June, over $44,000 per truck. That's up $3,600 from the (good) average prices Ford was getting in June of last year -- and much of that is pure profit, on an already-very-profitable model.
A strategy to maximize profits while supplies are tight Even though the new F-150 began arriving at dealers late last year, supplies have remained tight. Manufacturing the all-new truck, with its aluminum body panels, required extensive changes to the two factories that build the F-Series. Each factory was down for about three months in total, which cost Ford roughly 90,000 units of production. But both are now up and running at full speed.
A task for Ford this fall: boosting commercial fleet sales of the all-new F-150 as supplies permit. Source: Ford Motor Co.
Ford had built up inventories of its old 2014-model trucks to give its dealers something to sell while it worked to increase production of the new truck. That plan worked out fairly well, but most of those 2014-model trucks are gone now. A Ford official said on Wednesday that just 10% of the F-150s sold in June were 2014 models.
The key takeaway: From here on out, nearly all of Ford's F-150 sales will be of the new-for-2015 model. Soon, dealers will have full inventories of the new trucks -- and Ford will be able to ramp up its sales to commercial customers once again. The extremely fast turnover of the trucks that Ford has delivered so far suggests demand will remain very strong. F-Series sales numbers should be far more impressive by fall.
That, more than any other single factor, should boostFord's profits substantiallyin the second half of 2015.
The article Ford's Truck Sales Fall Again, But Investors Shouldn't Worry originally appeared on Fool.com.
John Rosevear owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. 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.
Copyright 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.