As Ford Motor Co. started to ship its new aluminum-bodied F-150 pickup, they tumbled to the lowest rating in five weeks after Deutsche Bank AG downgraded them due to a specific concern – the truck won’t command premium prices in the middle of low fuel costs.
Ford shares dropped by 4.7%, to close at $14.28, which is the lowest since November 10. The auto company is off 7.5% this year. CNN reported that it’s one of the worst performing stocks in the Standard & Poor’s 500 Index (S&P 500). As the second largest automaker in the US, Ford said that they’ve shipped more than 5,000 2015 F-150 models, which has a 29% fuel economy improved feature thanks to its lightweight aluminum body panels.
The Cause of Dropping Shares
According to Rod Lache, an analyst at Deutsche Bank in New York, many consumers aren’t motivated to buy and pay more for the F-150 because of the declining gasoline prices in the US. Lache also noted that automakers are facing “regulatory cost burdens” because they need to achieve an average fuel economy of 54.5 miles per gallon by 2025.
“Ford’s new 2015 F-150, which incorporates a number of advanced but costly power trains, light-weighting and safety technologies, represents one of the most prominent early examples of this forthcoming change. We question whether consumers will pay the price for this content with $2-$3 gas,” he specified.
Ford revamped their F-150 this year with fuel efficiency as its selling point. It’s 700 pounds lighter, as the body is made of aluminum. Its price starts at $25,420, which is $400 more costly than last year’s model.
The Pretax Profit of Ford
The automobile giant sold about 763,402 F-Series pickups in the previous year, which is 18% more than their sales in 2012. This became the US top-selling vehicle line for 32 consecutive years, boosting their North American pretax profit to $8.78 billion.
In September, CEO Mark Fields said that Ford would earn a $6-billion pretax profit this year. They’ve missed their $7 to $8 billion goal, as recall costs and losses in Europe and South America were rising. Lache added, “Ford’s product strategy, set 3-4 years ago, likely contemplated a somewhat different market dynamic vis a vis energy costs.”
Ford introduced the 2015 F-150 in November, which is around the same time when gasoline prices started to decline. Average gasoline prices fell to $2.545 a gallon, which is the lowest since October 16, 2009.