Last week, Bloomberg reported that despite the initial popularity of Ford’s redesigned, aluminum F-150, sales had tanked to the point that the company was offering $10,000 in incentives to keep inventory moving.
Specifically, a 2015 F-150 XLT SuperCab 4X4 with the luxury chrome or sport package could be supposedly be purchased in some regions with “up to $10,029 in total savings.” In other regions, the combined savings were closer to $7,000.
The article noted that sales of Ford’s F-Series pickup trucks were down 8.9% over last year, and its share of the market had fallen from 33% last year to 28%. It then quoted Kelly Blue Book analyst Akshay Anand saying, “The truck hasn’t sold up to expectations for the most part. This may be a hint that in certain parts of the country, the issue might just be more than supply.”
Considering the regional nature of the incentives used for the story, Anand followed that up with the speculation that “[w]hat will be more telling is whether the incentives start to go out nationwide. If limited to higher-end trims and packages, this may not have a huge effect for the moment, as a truck still makes plenty of profit.”
There’s nothing factually inaccurate about what Anand said, but the gist of the Bloomberg article is that Ford is having to resort to offering large incentives in order to reverse a sales slump. What’s confusing, though, is that the article mentioned that overall incentive spending is down versus last year, and the trucks themselves are selling at record average prices. It also mentioned that Ford cut how much it spent per vehicle on marketing, but it didn’t include the fact that trucks are spending an average of 32 days on dealer lots, selling significantly faster than the competition.
If Ford’s overall incentive spending is down, the trucks are selling quickly, their transaction prices are high, and Ford isn’t having to spend as much on marketing, does that not point to the idea that people actually do want the new F-150? Does it not make more sense that low inventory is behind lower year-over-year sales?
Part of why inventory is low is that it’s a long, complex process to convert Ford’s two F-150 plants for using aluminum, but The Detroit Bureau is also reporting that “Ford cut weekend shifts at its Dearborn Truck and Kansas City Assembly plants because the supplier they use for the frames, Metalsa, was unable to meet the demand.”
If that’s true, then the production problem is at least partly a problem with a supplier over-promising in regards to the number of frames it could build. Since a truck needs a frame, not having enough frames would present a major production hurdle. The production issues have supposedly been fixed, and so despite having only half of its normal inventory in June, Ford expects to be back at full capacity by September.
If there’s a sales slump to be measured, it will be in October, November, and December, not right now. If Ford’s F-Series sales are still off at that point, then there may be cause for concern, but until then, the evidence supports the idea that lower sales are a production issue.
If Ford’s not trying to stave off a sales slump, though, then what’s the deal with the incentives? Since they’re being offered by individual dealers, it could be that they were trying to match a local competitor’s pricing initiatives.
Citigroup’s Itay Michaeli and Justin Barell also offered the theory that “perhaps dealers are seeing consumers push back on a $43-44k price point—a price point that after all is somewhat unchartered in the segment and $~4k above General Motors’ price point.”
With the current F-150 being such a major change versus the old version, it makes comparing the two more difficult than typical redesigns tend to be. There’s no denying that Ford has had production problems and hasn’t been able to keep its dealer inventory fully stocked, but at least for now there’s no reason to believe that a few regional incentives are indicative of an F-150 sales slump.