Why Is Ford Discounting the F-Series?
Ford Motor Co.’s (NYSE: F) best-selling vehicle, the F-Series pickup, gets star billing at the car maker’s website. According to the number two U.S. car and light truck manufacturer, the F-Series has been the best-selling truck in America for 37 years. So why is Ford offering discounts on the pickup, which presumably hurts the company’s profits?
Ford’s current offer for the base F-150 is 0% financing for 60 months, plus a bonus of $1,500 for the trade-in of a limited number of vehicles. The five-year 0% deal may not hurt Ford badly, unless, perhaps, interest rates spike within the next few years.
The answer to the question of why Ford has moved to discount the F-Series may be due to the pressure from sales of General Motors Co.’s (NYSE: GM) Chevy Silverado and Chrysler’s Dodge Ram. Sales of the F-Series fell 4.2% in August to 68,109, and they are down 0.4% for the first eight months of the year to 497,174. The Silverado’s sales are up very modestly, by 12.8% in August to 49,201 and by 1.1% year-to-date to 331,977.
While the Ram has not threatened Ford for the top spot in pickup sales, it has taken a great deal of market share in 2014, and it could pass the Silverado in sales this year or in 2015. Sales of the Ram were up 32.6% to 43,775, and higher by 20.7% to 283,256 year-to-date. In August, it was the fifth best-selling vehicle in America.
Incentives are almost always a sign of flagging demand or an attempt to gain market share. Ford can argue that the F-Series is by far the leader in American vehicle sales. However, the company cannot argue that threats to its unit sales growth are creating great pressure, particularly from Dodge. The 0% financing offer for 60 months is a sign of weakness, no matter how it is postured.