Ford (NYSE: F ) reported on Tuesday that its U.S. sales rose 7.1% in November, powered by a continuing strong market for full-sized pickup trucks.
Overall, November was a good month for Ford. But looking deeper, the Blue Oval's sales results were kind of a mixed bag.
Strong sales, but big incentives
What do I mean by a "mixed bag"? One the one hand, sales of Ford's F-Series pickups were up 16% over a very good November of 2012. Sales of the F-Series are probably the most important driver of Ford's profits in North America, so a big increase sounds like great news.
And Ford did well in other key segments. Sales of the Fusion sedan were up 51% over November of 2012. That was when the company was still ramping up supplies of what was then an all-new model, but last month's results were still impressive given the intense competition in the segment.
But Ford's incentives were also up. Incentives are discounts that are funded by an automaker. They include the "cash back" or cheap-financing deals that you see heavily advertised, as well as other offers that may be specific to a region or certain trim lines of a particular model.
Incentives are part of doing business in the full-sized truck market, but even so, Ford's have been high recently. According to Edmunds.com, the "total cost" of Ford's incentives on the F-150 was $4,685 in November, highest of the Detroit brands. That's actually a small decline from last month, but it's well above the $3,432 that GM paid on the Chevy Silverado.
GM has all-new pickups, and is making a determined effort to get the best prices possible for them. Meanwhile, it appears that Ford is being more aggressive in pricing, and not just on pickups, with programs like its heavily promoted "Black Friday" sales event.
That's good for sales, but it might not be so good for profits. But that said, Ford's profit margins in North America have recently been among the best in the business, so concerns may be premature.
Ford's inventories are up
Ford sales analyst Erich Merkle told reporters on Tuesday that the company had a 89-day supply of vehicles as of the end of November. That's down a bit from October, but up significantly from the inventories that Ford was carrying a year ago.
That's not a cause for concern in and of itself. Demand is higher now than it was a year ago, and Ford -- like some of its rivals -- may be expecting a surge in truck sales as small businesses move to take advantage of tax savings before year's end.
Ford is also expected to show an all-new F-150 in January, and to roll it out sometime next year. The company may be in the early stages of stockpiling trucks to help it meet demand while it changes over its factories to the all-new model, something GM was doing at this time last year.
The upshot: Despite concerns, Ford's on track
Pickups and mid-sized sedans are both important markets for Ford, and competition in both has become fierce. I talked about pickups above, but the sedan market is even more brutal. Toyota has been offering no-cost, 60-month financing on its Camry, and Nissan's incentives were up big in November.
That makes Ford's strong sales of the Fusion more impressive. The Fusion has gained significant market share in 2013, much of it at Toyota's expense, while maintaining strong average transaction prices. Ford said on Tuesday that it was getting significant "conquest sales" from Toyota, especially in key West Coast markets. (A "conquest sale" is a sale where a customer trades in a different brand of car.)
Long story short, despite Ford's somewhat high incentives last month, its story here in the U.S. continues to be a good one.
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