Top U.S. automakers Ford (NYSE:F) and General Motors (NYSE:GM) have been battling in recent years to capitalize on the growth of the extremely profitable pickup market. During 2013, Ford was the clear winner, and it aimed to solidify its dominance of the segment by rolling out a bold new design with lightweight aluminum body panels for the 2015 Ford F-150.
However, Ford was already running its factories flat-out to keep up with demand before switching over to production of the new model. To execute the complex changeover, it has needed to take months of extra downtime in the past year between its two plants.
That has crimped production. And with low gas prices keeping truck demand red-hot, General Motors continues to take advantage of the supply constraints for the 2015 Ford F-150.
GM won in the first half of 2015
Ford came into the year with low F-Series inventory, and for most of the first half of 2015, its Kansas City Assembly plant was not running at full speed. As a result, deliveries of F-Series trucks declined 2.4% year over year in the first half of 2015.
By contrast, combined sales of GM's Chevy Silverado and GMC Sierra full-size trucks rose 12.8% year over year in the first half of the year. That was particularly remarkable because GM also reintroduced its line of midsize pickups -- the Chevy Colorado and GMC Canyon -- in late 2014. Including those midsize trucks, total GM pickup sales soared nearly 30% year over year in the first half of 2015.
Comparing GM and Ford head-to-head, the former won the sales battle comfortably in the first half of 2015. Looking just at full-size trucks, GM's deliveries totaled 376,672, compared to 357,180 for Ford. Including the midsize trucks, GM delivered 433,264 pickups, putting it 21% ahead of Ford. (Ford no longer sells midsize trucks in the U.S.)
Production back to normal: Inventory, not so much
Ford was up to full production for the 2015 Ford F-150 last month, allowing it to post year-over-year sales growth while also adding about 2,000 trucks to its channel inventory. Nevertheless, dealers remain well below normal inventory levels.
Ford is hoping to get back to more normalized inventory levels by the end of Q3. Ultimately, that will depend on demand: The more that sales improve sequentially, the harder it will be for Ford to rebuild dealer inventories.
That's not such a bad thing for Ford and its dealers -- it will allow the automaker to continue driving strong average transaction prices and limiting incentives on the 2015 Ford F-150. But it's even better for General Motors.
Indeed, GM had its best month yet for pickup sales in July, even though Ford was back up to full production. GM dealers delivered 76,188 full-size trucks during the month, compared to fewer than 60,000 in July 2014. That compared to 66,288 F-Series deliveries for Ford. Additionally, deliveries of the midsize Colorado and Canyon reached nearly 10,000 units in July.
Ford's persistent inventory shortages for the 2015 Ford F-150 have come at a bad time, because demand for pickup trucks has been soaring in the U.S. this year. With oil prices having recently fallen back below $50 per barrel, gas prices are likely to drop significantly in the coming months, which could further strengthen pickup truck demand.
Ford should be able to boost its pickup sales somewhat from July's level by running its truck plants flat-out for the rest of the year. However, since it is starting from such a low inventory position, it may struggle to respond to demand growth in the truck segment during what is already a seasonally strong period for truck sales.
Meanwhile, GM will continue to benefit as long as inventory of the 2015 Ford F-150 remains tight. It took a big risk by reintroducing the Colorado and Canyon midsize trucks, because of the possibility that they would cannibalize the pricier and more profitable Silverado and Sierra.
Instead, the General has seized a solid share of the midsize truck market this year while simultaneously posting double-digit growth in the full-size truck market. That's a clear win-win for GM investors.