Ford Motor Company (NYSE:F) said on Monday that U.S. sales of its F-Series pickups rose 4.8% in July. It was the first monthly sales gain for the F-Series since January.
Any gain is good news for Ford shareholders, of course. But given the 33.9% year-over-year sales increase posted by General Motors' (NYSE:GM) Chevrolet Silverado in July, that doesn't sound like much of a gain for the Blue Oval's most important product line.
But a closer look at the numbers shows that Ford may finally be close to a big sales breakthrough.
Two big numbers that tell a good story for Ford
Here are the two big numbers: First, retail sales of Ford's F-Series rose 13% in July. Second, the average transaction price for F-Series pickups during July was about $44,000, up about $3,200 from a year ago.
What does that tell us? It tells us that demand for Ford's new F-150 continues to be white-hot even as Ford is getting more of the new trucks to its dealers.
Sales of Ford's F-Series, which includes the F-150 and its Super Duty siblings, have been weak for months. That's because the all-new 2015 F-150 has been is short supply. Both of Ford's pickup factories required weeks of downtime in order to install the tooling necessary to make the new aluminum-bodied truck. Given that both factories run nearly around the clock at a fast pace, the upshot was a shortage of Ford pickups.
Ford anticipated this problem. Last year, it built up extra supplies of the old 2014 model so that its dealers would have plenty of trucks to sell during the complicated transition to the new model. And it has been prioritizing retail deliveries of the new F-150 over commercial-fleet sales, which are normally a substantial part of Ford's pickup business.
So far, that strategy has worked out well. Ford's second-quarter profits were extremely strong despite the lower truck sales. That's because the new F-150 has been getting very strong prices at retail, a trend that continued in July despite a planned end-of-the-model-year boost in Ford's incentives.
But investors have been eager to see how the all-new F-150 would perform head-to-head with GM's Chevy Silverado and other rivals once Ford's dealers have full supplies. The good news is that we're finally getting close to that point.
Ford's supplies are still tight, but the end of the ramp-up is in sight
Ford's dealers still have a few of those 2014s, but they're mostly gone. Of the F-150s sold in July 92% were new 2015 models, Ford sales analyst Erich Merkle said in a conference call for analysts and media on Tuesday.
Meanwhile, dealer inventories of the new F-150 are only about half of what Ford would like, but it's gradually catching up. It now expects to be at full stock by the end of the third quarter.
General Motors in particular has been able to make a lot of gains at Ford's expense during the new F-150's extended rollout. The General's commercial-fleet sales are up 17% this year through July -- and sales of the Silverado and its upscale GMC Sierra twin have been on a tear.
The boom in pickup sales was one of the factors that helped GM to an outstanding 10.5% operating profit margin in North America in the second quarter.
GM knows it has a tougher fight ahead
GM is already moving to try to head off the big increase in competition that will come as Ford gets more of its new trucks to dealers and boosts its commercial sales. The General ratcheted up its truck advertising last month, and more aggressive marketing moves are expected.
But I think both of the pickup heavyweights will be loath to engage in a big discounting war. Both Ford and GM have been much more disciplined with incentives in recent times -- another big contributor to fat profit margins at both -- and I expect that to continue.
We may, however, be in for a big war of words (or at least, of TV ads) as Ford gears up to retake its lost market-share ground from GM. Stay tuned.