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 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.
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?
Ford has called in the FBI to help investigate possible espionage after a longtime engineer was recently fired. The FBI swept the offices and recovered several listening devices. Are truck/car “secrets” really that valuable?
Sources tell us, Ford is planning on opening its order banks on the new 2015 F-150 in the coming weeks. This move creates some interesting product timing issues for the new truck. As one of the most scrutinized truck launches in recent memory moves forward, is Ford making the right decisions?
A top Toyota executive has reconfirmed their plan to overhaul their engine lineup with new turbocharged and fuel saving options. What this means for trucks isn’t clear, but it is likely there will be a turbocharged engine option in the future.
You may have seen a rash of stories on Toyota’s new engine overhaul strategy (for example this TruckTrend story). All of these stories are coming from this AutoNews.com story and is basically just another spokesperson confirming this story we ran in December.
In short, Toyota is planning to radically change up its engine lineup in sedans and cars with smaller displacement turbocharged engines. This is a shift from their long-time strategy of putting hybrids above all else.
According to AutoNews.com, the future will be for the base engines to take Toyota’s take multi-pronged approach to better fuel economy:
- Lean-burning Atkinson cycle combustion in regular cars, not only hybrids.
- New intake ports create a vertical air-fuel swirl for more rapid combustion.
- Expanded variable valve timing improves combustion efficiency.
- A high compression ratio improves power and efficiency.
The first engine developed for this purpose was recently unveiled in the new Lexus NX. This SUV is powered by a turbocharged engine utilizing both the Atkinson and Otto engine cycle. By using both of these systems, Toyota is betting their turbocharged engine will be the best on the market.
It also seems incredibly likely the Camry will be next on the list to get a new turbocharged engine.
Truck Engines Future
What does this have to do with trucks? Simple. These engines will eventually make their way into trucks in some form. For example, it is easy to see Toyota dropping it into the Tacoma. It is also feasible for the Tundra to have an “EcoBoost” like engine.
The problem for trucks is still the “work” aspect of using this type of engine. While Ford has turned many people on to their turbochargers, there is still a significant amount of truck buyers who simply don’t buy into it.
Also, the Atkinson cycle has been regulated to only hybrids for years. It has never really been used in a different application like the Lexus NX. Will it be a problem? Probably not, but we really don’t know yet.
Ultimately, these engines are still 10 to 15 years away from being offered throughout Toyota’s lineup. This means, it will be more likely Toyota will offer one for the Tundra sometime in the 2020s – right before the 2025 CAFE requirements hit.
The sales growth of Ram Trucks is a good/bad news scenario for Chrysler. Why? The convoluted system of EPA credits, CAFE fuel economy targets and Chrysler’s failure to sell small, fuel-efficient cars. This system means long-term the FCA is in trouble. Here’s why.