Is Too Much Discount Costing Ford (NYSE: F)?


As Forbes described it “the most important industrial company in the United States”; The American multinational automaker Ford (NYSE: F) Motor Company is most popular for automobiles and commercial vehicles. It also deals with luxury cars under the Lincoln brand and specializes in producing tractor and automotive parts. Ford (NYSE: F) has shares in Mazda of Japan, Aston Martin of the United Kingdom and Jiangling of China. Its joint ventures include ChanganFord Mazda and FordLio Ho in the Chinese market. AutoAlliance,Thailand, FordOtosan in Turkey and FordSollers in Russia. In a nutshell this is what the company is worth and how it branches out.

Among Ford (NYSE: F)’s latest invention is the F-series pickup. It received a positive response from the customers on its website and has been the best-selling truck in America for over 37 years. This brings the question to mind that with such positive stats instead of rounding off prices at the higher scale, why is Ford (NYSE: F) offering discounts on it and as a result hindering the company’s profit for sure. The current Ford (NYSE: F) deal on F-150, offers 5 years of 0 percent financing along with a $1,500 bonus for trade in of selected items. If however the Federal Reserve shifts the interest rates, the company could suffer losses or possibly a greater margin.

Looking at the competitive environment all around, it has been concluded that maybe the F-series discount was less of an offer but a respond to the competition. The biggest competitors in the market for Ford (NYSE: F) are the General Motors Co (NYSE:GM)’s Chevy Silverado and Chrysler’s Dodge Ram. The F-series sales fell by 4.2 percent last year which means a total of 68,109 in the month of August. However if we look at the last eight months the percentage drop is around 0.4 which means a total of around 467,174 cars. Contrarily Silverado sales have risen by around 12.8 percent in August, selling around 49,201 units and the percentage increase is around 1.1 percent if we consider the last eight months with a total sales figure 331,977.

Ram on the other hand, hasn’t posed any direct threat to the pickup sales of Ford (NYSE: F) but it has steadily taken away a huge portion of the market share in 2014 and at this stage seems likely it will eventually cross Silverado’s sales by 2015. Ram was nominated the 5th best automobile in America this August. Its sales rose by 32.6 percent to 43,775 units and remained at a high of 20.7% through out to 283,256.

Even though the F series is to date the market leader but threats from multiple companies has started which is the reason why Ford (NYSE: F) has started offering incentives and other attractive offers with its sales. These are tactics necessary to maintain and increase Fords market share because Dodge seems to be threatening sales. But the question that arises now is that could this deal end up costing the company more?

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