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Why Ford's New 2017 Super Duty Pickups Are Booking Fat Profits

By John Rosevear - Dec 19, 2016 at 6:20PM

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Average transaction prices for the new Super Duty at retail are up about $10,000 over the outgoing models. Here's why Ford says its buyers are willing to pay up.

Ford Motor Company ( F -0.41% ) says that its new F-Series Super Duty pickups, first launched in September, are off to a strong start -- even stronger than it had expected. The early success of the new big pickup line has implications (good ones) for Ford's fourth-quarter earnings report. Here's why. 

A 2017 Ford F-250 Super Duty Lariat equipped with the expensive -- and popular -- diesel engine option. Image source: Ford Motor Company. 

Sales are up, and buyers are choosing loaded models

Ford doesn't break out Super Duty sales from its overall F-Series sales reports. But it did say in a statement on Monday that total sales of the new-for-2017 Super Duty models were up 24% in November from a year ago -- and retail sales were up 33%.

The retail-fleet distinction is significant. The Super Duty is popular with commercial-fleet operators, and Ford views that as good, profitable business -- but retail sales are where the biggest profits-per-truck are usually realized. That's because retail buyers tend to opt for upscale trim lines with more luxury and convenience features, and those are the most profitable trucks for Ford. 

Ford's typical practice when launching a new model is to emphasize higher-level trims in early production to maximize profitability while the product is in highest demand. But demand for loaded Super Duty trucks has exceeded the company's expectations, Ford officials said.

High-tech features and diesel models are in strong demand at retail 

The new Super Duty in five trim levels, from XL to Platinum. Generally, the highest volumes are at the lower tiers. But Ford said that the top three trim lines -- Lariat, King Ranch, and Platinum -- accounted for 71% of retail Super Duty sales in November, and that trend has been consistent since the new truck's launch and into December. 

That's a big deal. While an F-250 XL starts at $32,535, the starting price on a top-tier F-250 Platinum is about $30,000 higher ($62,110) -- and options like an $8,000 diesel engine package can take that price over $70,000. (That may sound like an expensive diesel, but Ford said that about 80% of retail Super Duty buyers have opted for the diesel so far.) 

That's a lot of money for a pickup truck. But Ford says that, at least so far, its retail truck buyers have been willing to pay up because of the new Super Duty's unique emphasis on high-tech features. Ford went to great lengths to include features like adaptive cruise control to its big trucks by optimizing them for specific use cases, like towing a heavy trailer. And it created a special system to help guide a driver when backing up the truck to connect to a trailer.

Ford's new Trailer Reverse Guidance system, optional on the Super Duty, aims to simplify the daunting task of connecting a big pickup truck to a trailer. Image source: Ford Motor Company. 

At least one dealer thinks that the Super Duty's emphasis on useful technology is drawing a lot of new buyers. "The technology features in the new F-Series trucks, in particular the all-new 2017 Super Duty, are generating even greater interest," said Chaz Gilmore, the managing partner of Grapevine Ford Lincoln, near Dallas, Texas, as quoted in a Ford statement. "This truck is bringing a lot of new buyers out of competitive brands and into the Ford family."

Ford officials say they're discovering that heavy-duty truck customers on the high-end retail side have been waiting for this kind of technology, which hasn't been available on the biggest pickups. That's drawing a lot of them to Ford dealers right now. 

Ford's investment in tech as a differentiator in trucks is paying off here

A Ford official told me that average transaction prices on the 2017 Super Duty since its launch have been just over $60,000, up about $10,000 from what the outgoing model was averaging before the 2017's launch.

There's a lot of profit for Ford in the difference, and that bodes well for the Blue Oval's fourth-quarter result.

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