Ford Motor Company (NYSE:F) investors let out another collective groan Monday as America's second-largest automaker's stock dropped nearly 5%. The reason behind Ford's stock decline was largely due to a downgrade from Deutsche Bank as concerns were expressed about Ford's 2015 F-Series truck -- its best-selling and most profitable product. Apparently investors are buying into Deutsche Bank's downgrade, but I'm not. Here's why.
Let's kick things off by explaining Deutsche Bank's rationale for the downgrade.
"Ford's new 2015 F-150, which incorporates a number of advanced but costly powertrain, light-weighting and safety technologies, represents one of the most prominent early examples of this forthcoming change [to more fuel-efficient vehicles]," wrote Rod Lache, an analyst at Deutsche Bank in New York, according to Bloomberg. "We question whether consumers will pay the price for this content with $2-$3 gas."
Essentially, Lache is concerned that with gasoline prices hovering around a five-year low, Ford's next-generation F-Series trucks are going to have a more difficult time convincing consumers to fork over extra cash for a truck built specifically to help save on gas. At first glance, that seems to be a reasonable assumption. It's also not surprising that investors were quick to jump ship at the thought of Ford's most important product failing to win over consumers. However, I'm not convinced that will be the case at all.
If you had to guess which vehicle led the entire industry in U.S. sales with transaction prices exceeding $50,000, what vehicle would you guess? A Mercedes Benz E-Class, perhaps? Maybe a BMW 5-Series? Those would be solid guesses, and conventional wisdom would lean toward luxury vehicles. In fact, it's Ford's F-Series.
Not only that, but the F-Series is expected to sell nearly 190,000 trucks above the $50,000 mark in 2014 . Or put another way, more than 25% of F-Series sales check out at the register for more than $50,000 -- consumers are already forking over high dollar for a truck that isn't as fuel-efficient as the 2015 F-Series. For more context, only 17% of consumers are willing to pay more than $50,000 for the Ram pickup and even fewer are willing to pay that for a Silverado, at 11%.
Money, money, money!
So, if consumers are already willing to pay top dollar for Ford's trucks, that trend seems likely to continue, regardless of where gasoline prices are. And let's be honest, how many people truly expect gas prices to stay near this five-year low?
Furthermore, consumers paying high dollar isn't a trend limited to F-Series: Automotive sales in the U.S. exceeding $50,000 grew more than 30% from 2013 to 2014, according to TrueCar estimates. As consumers gain more confidence in the economy, and credit remains easily available, consumers are more willing to spend extra money on vehicles.
Heck, you could even make the argument that lower gas prices could send demand for large SUVs and full-size trucks even higher. That, in turn, would benefit all truck makers, and then Ford's improved fuel economy with the F-Series line would simply be icing on the cake.
Rod Lache believes more consumers will walk away from Ford's more fuel-efficient truck with lower gas prices. I believe Ford's loyal consumers will continue to buy America's best-selling vehicle at a high clip regardless, just as they have always done. To me, a 5% sell-off seems like a knee-jerk reaction to a downgrade, especially as Ford is about to enter a new year that looks to be much more profitable for the automaker than 2014.
Daniel Miller owns shares of Ford. The Motley Fool recommends and owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.