Will Small Price Increases Mean Big Sales for Ford's 2015 F-150?

The workhorse XL version of the new 2015 Ford F-150 will have a starting price of $25,420. Source: Ford.

So how much is that aluminum-bodied 2015 Ford (NYSE: F  ) F-150 going to cost?

That's been a subject of much debate among analysts and industry observers. But now we know the answer: The new truck will start at $25,420, up just $395 from the 2014 models. (That price doesn't include the $1,195 "destination charge," essentially a shipping fee, that is added to all models.)

That's a smaller increase than many expected. But it's not entirely a surprise: Small increases in price can be a big deal in the full-sized pickup market. 

On the other hand, the new F-150's body panels are made entirely of aluminum, which is more expensive than steel. 

We've wondered how Ford would square that circle, and now we know: small price increases on base models and larger increases on the plusher versions.

Ford priced its mainstream F-150s for big sales
Ford hasn't officially announced prices for its new trucks -- at least, not exactly. But the automaker opened its order banks for the new F-150 to its dealers on Monday, and word on the new trucks' pricing is out. 

The $395 increase on the base price for the XL trim buys you quite a bit: All of the improvements that are part of the new F-150 (including those aluminum-alloy body panels), along with some added standard equipment. The 2015 base-level trucks include brand-new LCD screens in the instrument cluster (2.3 inches) and center stack (4.2 inches) that provide a variety of information and functions, along with a telescoping wheel and two additional speakers on the standard stereo, according to Ford officials. 

The next trim level up, XLT, also comes with just a $395 price increase (to $30,730, again not counting that destination charge). The XLT also gets some new standard equipment: a power tailgate lock and Ford's new BoxLink system, a tie-down system in the truck's cargo box that uses special brackets and cleats to make it easier to secure material.

Next up is the F-150 Lariat, which gets a bigger price increase of $895, to $38,535 before that destination charge. This is a plusher package, and it gets some added premium features for 2015: a bigger LCD screen in the instrument cluster (eight inches), along with LED cargo-box lighting, heated and cooled seats, power fold mirrors, and a rear-view camera.

This Ford press photo shows the eight-inch "productivity screen" between the gauges in the 2015 F-150's instrument cluster. The eight-inch screen is standard on Lariat and higher trim lines. Source: Ford.

Ford expects those three trim lines -- XL, XLT, and Lariat -- to account for about 85% of F-150 sales. For those who want an even plusher ride, Ford will again offer the King Ranch and Platinum trims. But with those the price increases are more substantial.

You'll pay more for the top-line versions
For 2015, the base price for the F-150 King Ranch (not counting the destination charge) jumps from $44,880 to a hearty $48,495, a $3,615 increase.

Again, Ford has added a bunch of standard equipment to offset the price increase. The 2015 King Ranch gets new LED headlamps and tail lights, blind-spot and lane-departure warning systems, a 360-degree camera (extremely useful when parking in tight spaces, I discovered in another vehicle recently), and other goodies including LED side mirror spotlights.

The top-of-the-line 2015 F-150 Platinum will start at $50,960, more than $3,000 higher than the 2014 model. Source: Ford.

It seems like a reasonable deal if you want all of that high-tech luxury equipment. 

But with the big increase on the King Ranch (and on the top-of-the-line Platinum, which jumps $3,055 to $50,960 before destination charge), I wonder if Ford hopes that its luxury trucks will help offset the increased costs of the new F-150's aluminum body panels that it might not be fully willing to pass on to buyers of more mainstream models.

Does $395 really cover the added costs of these all-new trucks?
Here's the thing: Aluminum is roughly five times as expensive as steel, ton for ton, on commodities exchanges.

I don't know what price Ford is paying to Alcoa (NYSE: AA  ) and its other aluminum suppliers for the specific alloy it's using to make the 2015 F-150's body panels. But I would bet that it's significantly higher than the prices it paid for the steel being used to make the last of the 2014 F-150s.

Add in the (very expensive -- think well into the hundreds of millions of dollars) tooling overhauls that Ford is making in its two truck factories in order to build the all-new 2015 F-150s, and the costs of the switch to aluminum have to be huge.

Of course, those costs will be spread out over lots of trucks -- this is, after all, America's best-selling vehicle. But I'm skeptical that a $395 price increase on the XL model really covers the added cost of building that truck.

But Ford can't really increase its prices by much more than that, at least on its mass-market models, or price-sensitive buyers will shop elsewhere.

How will Ford preserve its profits on these new trucks?
So how will Ford preserve the big profits it makes from its pickups? 

It's still not entirely clear, but I'm guessing those luxury trim levels are a big part of the plan. We know that King Ranch and Platinum models are very profitable products for Ford, and we know the company has had a lot of success with premium pickup trim lines over the last few years. 

Ford probably feels, rightly, that it can't significantly boost its prices on the lower-end trucks (at least, not much more than it has for 2015) without losing sales. And even an XL with no options should still deliver a good profit at those price points, along with plenty of sales.

But I suspect Ford will make it up with the premium trim lines, as well as with appealing options packages that add to the price (and the profits) on those lower trim lines. 

We'll learn more as we get closer to the new F-150's launch. But here's what we can say right now: At least in the mass-market trim levels, Ford has priced its all-new F-150 to sell big.

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  • Report this Comment On July 29, 2014, at 6:28 PM, dmenace1 wrote:

    Sold Fords for 30 years in Northern California. By far the greatest # of trucks sold were the luxury models.

    The base or "work" models were usually kept until they were junk. The high end trucks were the owner's vehicle. These trucks were the only luxury item they could enjoy on a daily basis and still write off.

    If the weighting to luxury continues Ford will do well indeed.

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John Rosevear is the Fool's Senior Auto Specialist. John has been writing about the auto business and investing for over 20 years, and for The Motley Fool since 2007.

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