Earlier this week, Ford’s (NYSE:F) F-150 Lighting was named “Truck of the Year” by MotorTrend. This news sent F stock into the green as positive momentum shifted in favor of the auto giant. Unfortunately for investors, Ford promptly followed this happy news with something less positive. Yesterday, it announced it would be raising the electric truck’s prices by 8%. This brings the new price up to nearly $56,000. As of this writing, F stock has fallen more than 6% on the news.
Ford has staked a lot on the F-150 Lighting, believing the iconic truck’s widespread popularity will transfer to its new electric model. And while F stock has rallied over the past six months, it is still down more than 40% for the year. Now this price hike threatens to test an important question: How much are consumers willing to pay for the electric version of a truck they love?
What This Means for F Stock
It hasn’t been an easy year for Ford, as F stock has struggled to keep pace with competitors. The legacy automaker has ventured into the booming electric vehicle (EV) market with reputation on its side. However, that hasn’t made for a good year. As InvestorPlace writer Alex Sirois reports, Ford has reported fairly impressive EV sales growth with deliveries remaining high. However, things haven’t been so good for the company as a whole. Overall Ford vehicles sales fell 8% year-over-year (YOY) in November. Things have been worse for F-150 sales, which fell 15% last month compared to October.
That statistic raises the question of how much sense it makes to raise the truck’s prices now. It’s worth noting that Ford has hiked the cost of the F-150 multiple times in the past year. In August 2022, it raised truck prices by between $6,000 to $8,500. Less than two months later, it increased the price of the Ford F-150 Lightning Pro by $5,000. As noted, sales of the electric truck decreased during the following month.
None of these price increases have been surprising. Supply chain constraints continue to challenge automakers, and the cost of important raw materials such as cobalt and lithium have risen steeply as well. However, raising the cost by too much could easily chase plenty of prospective buyers out the door. One of Ford’s key competitive edges is that it has one of the least expensive electric trucks on the market. With every price hike, it compromises that advantage further and could create negative effects for F stock in the coming year. As InsideEVs reports:
“With 13,258 electric trucks sold until November of 2022, Ford hasn’t quite achieved its goal of making 40,000 units per year, but with a newly-reported ‘huge demand,’ the American manufacturer is trying to ramp up production to 150,000 by the fall of 2023 and increase its profits by upping the starting price.”
The Road Ahead for Ford
As of now, Ford’s future looks questionable but not completely bleak. Even with the price hike, the F-150 Lighting is still less expensive than the Rivian (NASDAQ:RIVN) R1T or R1S. However, if prices rise any more, that gap will get very close to closing. That said, some truck buyers may be more inclined to trust a legacy automaker than a new age startup. If Ford can keep F-150 prices at the current level, though, F stock could easily turnaround in 2023. If not, it will be at the mercy of a marketplace that is becoming increasingly crowded.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
