2015 Ford F-150′s Minimal Price Hike – No Aluminum Upcharge?

The buzz around the 2015 F-150 for months has been the use of aluminum and how it impact the price of the truck. With the price released this week, we learned the use of aluminum will have ZERO impact on the starting MSRP. Huh?

2015 Ford F-150's Minimal Price Hike - No Aluminum Upcharge?

Ever since Ford unveiled the all-new F-150 in Detroit, it was widely understood the use of aluminum would make it cost more. Yet, the new pricing from Ford says it doesn’t. What is going on?

2015 F-150 Prices Announced

Before we get into the issue of the price of aluminum, let’s start with Ford’s pricing announcement. Ford says the base price of the new F-150 will increase $395 for the XL trim level and upwards of $3,515 on top models.

Here is the exact breakdown from USA Today:

  • XL base work truck, $26,615 (including shipping fee of $1,195, unchanged from 2014), up $395. Its standard configuration is as a regular cab with rear-wheel drive and 6.5-foot-long cargo bed.
  • XLT, best-selling trim level, $31,890, up $395. The standard configuration also is regular cab, rear-drive, 6.5-foot bed.
  • Lariat, first of the premium versions, $39,880, up $895. Its standard setup is extended cab, rear-drive, 6.5-foot bed.

Ford says those three models make up 85% of F-150 sales. Prices will be higher for four-wheel drive and different cabs and bed lengths.

  • King Ranch, $49,460, up $3,515.
  • Platinum, $52,155, up $3,055.

Those two top models are crew-cab models with rear-drive. Four-wheel drive will be more expensive.

Aluminum Not Impacting Price Increase

The slight increase in the base price apparently isn’t about aluminum. Instead it is about the now standard features in the new trucks.

“Levine said the higher prices were due to additional standard features in all five trim levels of the F-150, and not because of the greater cost of aluminum over steel,” according to a Reuters story.

Our beef with this statement is simple. It just doesn’t equate to what we have heard from nearly everyone else since we sat in Joe Louis Arena in Detroit, MI for the unveil. By everybody, we mean executives from Ram, GM, Toyota, Nissan, former Ford enginees, Aluminum manufactures and pro-Steel groups.

Also, we found a 2007 MIT study that suggests Aluminum costs three times as much as Steel when using it to manufacture vehicles.

Plus, we found several articles from IHS, “a global information company with world-class experts in the pivotal areas shaping today’s business landscape: energy, economics, geopolitical risk, sustainability and supply chain management.”

These articles state facts like the new F-150 uses close to 1,000 pounds of aluminum. Also, the body panels are “not made from lower-grade alloys of the type used in making cans, but higher value added 5000 and 6000 series heat-treated alloys normally associated with aerospace and military applications.

A designer.com article states, “approximately 80 percent of the aluminum is 6000 Series and the remaining 20 percent is a 5000 Series, which has a lower yield strength.”

Raw Metal Price of Aluminum vs. Steel

Now that we know the aluminum they are using isn’t “cheap grade” aluminum, it can’t be cheap. According to Metalprices.com, the raw metal price of Aluminum alloy is approximately $0.90 per pound and Steel is $0.20 per pound.

Those prices are just for the raw materials. As we have reported in the past, another big cost to using Aluminum is manufacturing it and bonding/attaching the panels to the trucks. In fact, early reports suggested Alcoa was having trouble meeting Ford’s specific requirements. This tells us that manufacturing the Aluminum isn’t cheap.

Grabbing our calculator, we figure Ford replaced 1700 lbs of Steel with 1000 lbs of Aluminum alloy. If this is the case, then you are looking at a pure cost increase of $560 just for the raw material.

We suspect then the new trucks should cost anywhere from $1k ($560+395) to $2k more.

Where is the Price Increase?

The reality is Ford isn’t stupid. At some point, they will need to recoup their investment. Where does Ford do this? Our guess is at the dealership.

While part of Ford’s thinking with the aluminum F150 is about improving fuel economy for CAFE purposes, part of it is about raising transaction prices.

Consider a situation where a truck buyer is looking at a $35k Ram 1500 (MSRP) and a $35k F150 (MSRP). The Ram gets 18mpg combined and comes with an $7,500 discount. The F150 gets 22mpg combined and comes with a $4,500 discount.

Stepping inside the mind of the consumer:

  • The buyer recognizes that fuel costs will be much lower on the Ford, so they’re probably OK with the cost difference
  • The F150 is lighter so it drives nicer, and it also has more advanced technology, which makes it “better” in a lot of minds
  • The price discrepancy is fairly large, so the buyer is likely to assume the difference is substantial – meaning that a consumer is likely to see the Ram’s lower asking price as an indication of lesser quality/value

Our guess? Ford is trying to pull the same trick that GM pulled when their new truck came out. Ford wants to hold the line on incentives by convincing customers that their pickup is thousands of dollars better than the competition. SO, they’re not going to raise the asking price, but they’re not going to drop their pants on incentives.

Of course, Ford said this was their plan when the new F-150 came out in 2004 and again in 2008, and we think you know how that all worked out. Ford chases volume every year.

Ultimately, we believe incentives will be much lower on the new truck. At least for a while. If sales aren’t as strong as Ford hopes, than Ford is probably going to eat a lot of the costs associated with aluminum construction.

What do you think? Does the small price increase make sense?

Related Posts:
2015 Ford F-150 – The Aluminum Gamble
2015 Ford F-150 Delayed? Aluminum Production Problem
GM To Wall Street – Maintain Full-Size Truck Pricing, Profit Over Volume

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