Many truck enthusiasts are eagerly anticipating Ford Motor Company's (NYSE: F ) upcoming 2015 F-150. The newest version of America's best selling pickup will offer a big improvement in fuel economy thanks to its increased usage of lightweight aluminum in the body.
With a potentially revolutionary product coming to market later this year, it would not be all that surprising if demand for the 2014 Ford F-150 were slowing down. That's especially true because most of Ford's competitors -- including top rival General Motors (NYSE: GM ) -- have launched new pickup designs in the last year or two.
However, no demand slowdown has materialized. In fact, Ford has been able to maintain its market share and grow sales while limiting incentives and boosting average transaction prices. Demand is so strong that the company is looking for ways to build more 2014 Ford F-150s -- something that would definitely help the company's earnings this year.
Strong pickup demand continues
The U.S. auto industry has gotten off to a rocky start in 2014, but the same cannot be said for the pickup segment. At Ford, while total vehicle sales are down 2.1% year to date, F-Series pickup truck sales have risen 3.9%.
General Motors has had more issues in the truck market this year as its attempts to rein in discounts on pickups have driven away some potential Chevy Silverado buyers. Nevertheless, GM's truck sales are about flat this year. Moreover, GM posted strong growth in truck sales last month. Finally, the big standout in 2014 has been Ram, which has reported pickup sales growth of 23% this year.
Fiat Chrysler has rolled out big incentives on Ram trucks this year in order to generate that level of sales growth. However, everybody else has been pulling back on incentives and posting pretty solid sales numbers nonetheless.
For example, Ford reduced incentives on the 2014 Ford F-150 in April, offering lower incentives on average than either GM or Fiat Chrysler. (F-Series incentive spending as a whole was down $380 year over year.) As a result, the average transaction price for F-Series trucks rose about $1,200 to $39,000. Despite the higher pricing, sales increased 7.4% last month.
Building more 2014 Ford F-150s... hopefully
The looming introduction of Ford's new F-Series trucks later this year means Ford will have to take extra downtime in order to change over its truck plants so they can produce the new models. However, Ford's truck plants are already just about running flat-out producing the 2014 Ford F-150.
Because of the extra plant downtime scheduled for later this year, Ford's truck inventory could be very thin by year-end. Supply constraints for F-Series trucks could potentially disrupt Ford's ability to sell its most profitable vehicles.
On Ford's Q1 earnings call last month, Ford COO (and future CEO) Mark Fields took note of this issue and stated that the company is looking at ways to produce some extra 2014 Ford F-150s.
Ford could potentially run some overtime shifts at one or both of its truck plants to compensate for the downtime coming later this year. However, it needs to coordinate with suppliers -- who also may be retooling plants to support the next-generation F-Series trucks -- to ensure that they can support increased production.
Foolish bottom line
While Ford will be introducing a much-improved F-150 for the 2015 model year, plenty of buyers are eager to get their hands on a 2014 Ford F-150. This is helping Ford to post consistent pickup sales growth without offering big incentives, despite having the oldest full-size pickup of any major automaker.
This strong pickup demand environment bodes well for the launch of the 2015 Ford F-150. If General Motors maintains its discipline on incentives, Ford should be able to charge more for the new F-150 next year without jeopardizing its sales volume. This -- along with Ford's other major product launches this year -- will drive strong profit growth for Ford in 2015.
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