Why Ford's F-150 Still Dominates the 2014 Chevy Silverado

Last year, General Motors (GM 1.20%) rolled out a new generation of its full-size pickup trucks: the 2014 Chevy Silverado and the 2014 GMC Sierra. GM had been looking forward to this updated truck lineup for a couple of years, anticipating that it would be better able to compete with the segment leader, Ford Motor's (F 0.69%) F-Series. But so far, the new trucks aren't entirely living up to expectations.

The new 2014 Chevy Silverado hasn't driven sales growth for GM. Photo: General Motors

On the one hand, GM has been successful at boosting average transaction prices by promoting more expensive packages and remaining disciplined about discounts. This bodes well for the company's margins.

On the other hand, sales numbers have stagnated since the launch of the 2014 Silverado and Sierra. Ford has been able to win even more market share from GM in recent months through the use of targeted promotions on its 2013 and 2014 F-150 models.

GM truck sales stall
In the first eight months of 2013, when GM was still primarily selling the outgoing 2013-model-year trucks, the Silverado and Sierra posted big year-over-year sales gains. Through the end of August, Silverado sales were up 25.4% and Sierra sales were up 24% year over year for a combined sales increase of more than 90,000 units.

By the end of the year, the sales gains were much more modest. The Chevy Silverado closed out the year with a 14.8% sales gain for 2013, while the GMC Sierra finished up 17.3% year over year.

The combined sales increase for the full year was 89,306 vehicles. This means that all of GM's 2013 pickup sales gains came in the first eight months of the year. For the September-December period, GM pickup sales actually fell slightly compared to 2012.

No trouble in Ford-land
Over at Ford, pickup truck sales have remained very strong. Ford proudly announced last week that it has sold at least 60,000 F-Series trucks each month for eight consecutive months. In December, Ford sold 74,592 F-Series trucks -- more than 14,000 above the combined Silverado-Sierra sales total.

Ford F-150 sales have shown solid growth throughout 2013. Photo: Ford

While Ford lagged GM slightly in pickup truck sales growth through the end of August (with deliveries up 22.1%), Ford gained pickup market share for the full year with an 18.3% rise in F-Series sales. Ford's strong sales performance down the stretch and GM's stagnant pickup sales in the last four months of the year thus allowed Ford to increase its lead in the pickup segment.

Selling down inventory
It's important to remember that GM's decision to cut back on discounting is one of the main reasons that sales of the 2014 Chevy Silverado and 2014 GMC Sierra have been relatively slow. As my Foolish colleague John Rosevear pointed out over the weekend, this has been aggravated by Ford's use of big incentives to sell down its remaining 2013 F-150 inventory.

It's hard to blame GM's management for cutting back on discounts for the 2014 Chevy Silverado and GMC Sierra. Even without sales growth, improving average transaction prices for these trucks should help raise GM's earnings. Furthermore, Ford will soon be finished clearing out its 2013 inventory.

But it would be wrong to give GM a full pass here. Even if Ford will be done clearing its 2013 models soon, the 2014 F-Series is a transitional model. Ford will probably unveil the 2015 Ford F-150 at the Detroit Auto Show later this month, with an on-sale date later this year. The next-generation Ford F-150 is expected to be much lighter, and thus much more fuel-efficient, than the current model.

With such a big improvement coming in the 2015 model year, Ford is likely to provide generous incentives on the 2014 F-150 all year long. As long as Ford has enough inventory, it will want to give potential customers a reason to buy now rather than waiting for the improved 2015 model.

This means that GM could continue to face a choice between sales growth and margin growth this year. By next year, Ford's trucks will be the big new thing in the pickup market and the new Chevy Silverado and GMC Sierra designs won't really be so new. If GM wants to gain ground on Ford during this round of the pickup war, it needs to make its move soon.

Foolish conclusion
So far, the introduction of the 2014 Chevy Silverado and GMC Sierra models have had a positive impact on average transaction prices for GM. By holding the line on pricing, GM should achieve solid margin expansion. But a side effect has been an abrupt halt to sales growth. After gaining nearly 25% in the first eight months of 2013, GM's pickup sales have declined slightly in the last four months.

Higher discounts at Ford have made it harder for GM to sell pickups at full price. But if GM's sales pace doesn't rebound soon, the company will need to consider boosting incentives. With new Ford trucks on the way later this year, GM has a fairly short window of opportunity to improve its relative position in the pickup market.