General Motors (GM, Financial) is making big gains with its Chevy Silverado as Ford’s (F, Financial) preparing to increase the production level of its F-Series pickups to meet the robust pickup demand. In 2014, Chevy Silverado’s sales in the U.S. increased 10.3% to 529,755, while that of F-Series dropped 1.3% to 753,851. Though the F-Series has a huge lead over Silverado sales, even a small market share gain is a brownie point for the pickup. Let’s take a look at how General Motors’ has benefited from this, and whether the Chevy Silverado sales can continue growing at the current pace.
Ford’s pain GM’s gain
In the first quarter of 2015, Ford F-Series sales were up 2% to 177,312 units compared with last year. General Motors, in contrast, sold 18% more Chevy Silverado by selling 126,694 units during the same period. This clearly suggests that the F-Series’ market share is being eroded by the Silverado. Demand for trucks is robust and even better for the Silverado as F-Series dealers aren’t adequately stocked with the pickup.
General Motors’ U.S. VP of Sales Kurt McNeil said “as the economy gained steam throughout 2014, we knew 2015 would be a strong year for trucks.” March, in fact, was an extremely solid month with Chevrolet witnessing best pickup sales in eight years. Silverado sales jumped 7% to 45,193 units and Colorado sold exceptionally well.
Can Ford bounce back?
It must be noted that the drop in sales of Ford F-Series was not because of poor demand for the pickup. It was because Ford had its two key production facilities (Dearborn and Kansas City) idle for around two months as the company was retooling these plants to prepare them for manufacturing the new F-150. The facility overhaul at Ford’s Dearborn and Kansas City plant may be costing the company in terms of sales volume and market share loss to General Motors, but it was imperative for the Blue Oval to retool its plants for the new aluminum bodied F-150.
The question that needs to be answered is can Silverado sales continue to gain ground once Ford’s has its production facilities fully operational and boosts its supply level to stock its dealers well with the F-150?
Credit Suisse analysts believe that General Motors may have problem in ramping up production of trucks as the company may be constrained by capacity limitations. Presently small cars, mid-sized and luxury sedan sales aren’t doing that well for General Motors. This could be somewhat balanced by strong truck demand. But inventory level of trucks has fallen 8% from last year, though demand is 10% to 15% higher. Inventory levels in the first two months should increase to capitalize on the rising truck demand during Spring (a great selling season). However, inventory was virtually flat as production rates have stagnated.
General Motors needs to increase truck manufacturing capacity, else this could lead to poor sales performance. And in a situation as this when truck demand is soaring, inadequate inventory level is highly undesirable. In addition, pickups are the company’s top revenue and profit generating segments. As of now, the General Motors’ pickups are doing pretty well with Silverado and GMC Sierra sales up 41% in March. However, the company should improve its inventory level to keep giving a great fight to the F-Series, particularly as Ford’s almost ready to roll out the F-150 in big numbers by the next couple of months.
