Ford (NYSE:F) said on Tuesday that its U.S. sales grew 5% in August, on strong retail demand for pickup trucks and SUVs.
In particular, Ford's best-selling F-Series pickup line had its best month of the year, breaking 70,000 sales for the first time since December. Retail sales of the pickups grew 15% over a pretty good year-ago result. Including fleet business, F-Series sales rose 4.7%.
Does this mean that Ford is finally up to full speed with its new pickups?
F-150 inventories are still tight, but improving fast
Limited supplies of the F-150 have kept Ford's pickup sales roughly flat in 2015, despite booming demand for full-size pickups across the industry. Ford needed to make major changes to its two truck factories in order to manufacture the new-for-2015 F-150.
The new truck's aluminum-alloy body panels required new tooling and new production techniques. Both factories were closed for weeks to make the changes and supplies of the new trucks have been tight all year.
On the other hand, the new F-150s that did reach dealers sold very quickly -- with much smaller discounts than is typical in the pickup-truck market. Those higher prices helped keep Ford's profits strong despite a lower level of truck sales.
Inventories are still lower than what Ford considers "normal," U.S. sales chief Mark LaNeve said on Tuesday. The company had a 55-day supply as of the end of August; something closer to 90 days is normal for trucks.
But he said that August's results are probably typical of what we'll see through the rest of the year -- at least on the retail side of the business.
After a year of turmoil, Ford's truck sales are almost back to "normal"
So, what does that "new normal" look like?
Well, incentives on the F-Series are, in fact, up to a level that Ford considers to be "normal" -- about $4,700 per truck. That may sound high, but fat incentives are part and parcel of pickup sales in the U.S. It's just how the market works, and Ford (and its rivals) take it into account when pricing their trucks.
But that boost in discounts, plus a fuller "mix" of vehicles that includes more of the lower-priced versions of the F-150, pushed average transaction prices down from the spectacular levels we've seen in recent months.
LaNeve said that average transaction prices on the F-Series were about $42,500 last month. On the one hand, that's down from the levels (around $44,000) that we saw earlier in the year. On the other hand, Ford sold over 70,000 F-Series pickups in August, a number that it generally hits only once or twice a year -- and usually later in the year.
And on the other other hand, that average transaction price is still up about $2,000 from a year ago. If this is the new "normal," as LaNeve suggested, that's a nice place for Ford to be.
There's a little more upside left for the F-Series
There was a little more good news in Tuesday's report. Even if this is new retail "normal" for Ford's truck sales, there is still some upside left: fleet sales.
Last month, about 20% of Ford's F-Series were sold to fleet customers. Normally, Ford sells a lot more pickups to commercial fleets, about 35% to 40% of its monthly total, LaNeve said.
"Fleet sales" have a bad rap with some investors, but sales to commercial fleets (think contractors, cable companies, oilfield-services companies, miners, etc.) are good, profitable business. Ford competes hard for that business. But because supplies of the new F-150 have been so tight, the company has prioritized deliveries to dealers making retail sales.
LaNeve said that we can expect to see deliveries of pickups to Ford's commercial-fleet customers rise over the next few months. No other product has the impact on Ford's bottom line that the F-Series does. If the company can sustain its retail sales pace (and pricing), the upshot should be good for Ford's margins and profits over the next couple of quarters.