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How Ford's New F-150 Will Compete With the Diesel Ram

By John Rosevear - Jan 3, 2015 at 8:33AM

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The Ram 1500 EcoDiesel has a fuel-economy advantage, but that's not the whole story.

Ford's Dearborn Truck Plant began shipping the all-new 2015 F-150 to dealers in November. Early demand has been very strong, Ford says. Source: Ford Motor Company.

Ford's (F 2.21%) all-new F-150 pickup gets pretty good gas mileage: an EPA-rated 22 miles per gallon (combined city and highway) when equipped with the Blue Oval's new 2.7 liter "EcoBoost" turbo V6.

Ford says that's an improvement of anywhere from 5% to 29% over its outgoing model. But it's not enough to make the new Ford tops among full-size pickups. 

That honor goes to the diesel-powered version of Fiat Chrysler's (FCAU) Ram 1500, which is EPA-rated at 23 miles per gallon combined -- and which has done even better in some independent tests.

But Ford is betting that its new truck still has a big advantage over the diesel Ram with buyers who care about fuel economy -- and those buyers are important. Here's why.

Gas may be cheap, but fuel economy will still sell a lot of pickups
First, I should note that even though gas prices have dropped like a rock lately, there are still buyers who care a lot about a pickup's fuel economy, and those buyers are important to Ford (and FCA, too). 

Many commercial fleet buyers, for instance, look at the total cost of ownership over a truck's life -- something that makes a big difference when you're responsible for operating 10 (or 20, or 300) pickups at the lowest cost possible.

A difference of one or two miles per gallon can make a big difference in cost when it's multiplied over a few dozen trucks, tens of thousands of miles a year, and several years of service -- even at $2 a gallon.

Ford sells a lot of trucks to commercial fleets, and it wants that to continue. "Fleet sales" get a bad rap with investors, but not all fleet sales are bad ones. Ford executives emphasize that selling trucks to commercial fleets is good, profitable business, and they're happy to have it.  

So, isn't the diesel Ram undermining Ford's case with those buyers? Not as Ford sees it. There's one number that makes Ford confident (at least for now) in the new F-150's fuel-economy advantage: $0.914.

Diesel-fuel prices undermine the Ram's advantage
That's the difference in price between a gallon of regular unleaded gasoline ($2.299) and one of diesel fuel ($3.213) as of this past Monday, according to the U.S. Department of Energy. That price differential makes the one-mile-per-gallon difference between the Ram and the F-150 much more significant. 

How significant? Assuming 15,000 miles a year, and assuming a constant 22 miles per gallon for the Ford and 23 for the Ram, the Ram's fuel would cost $528.06 more than the Ford's at current prices -- even though the Ram would use less fuel. 

That gap may close over time. But right now, Ford has a pretty solid fuel-economy case for its new truck -- and even though it might not be talking about fuel economy in its new TV ads, you can bet that it's making that case to its commercial customers in a big way.

John Rosevear 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.

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