In a bid to more quickly move F-150 pickups amid declining sales, Ford Motor Co. has revived a controversial practice that critics say can erode trust and sow confusion among customers: stair-step incentives.
The automaker since February has been offering retailers escalating cash bonuses if they reach and exceed monthly F-150 sales targets.
The current offer, detailed this week in a memo obtained by Automotive News, pays $750 per truck sold if dealerships reach their target and $1,000 per truck if they reach 120 percent of that goal. In February and March, the company paid dealers $1,500 for each truck if they achieved 120 percent of their objective, two dealers told Automotive News.
The bonus payouts apply to certain 2023 models and include gasoline, hybrid and Lightning variants. Sales of 2024 models count toward a dealership’s monthly target but are not included when calculating its payout, according to the memo. Ford this month also added 2023 and 2024 Explorers to the incentive plan.
Stair-step incentives have long been derided by dealers who say the strategy is often counterproductive when used to chase market share and boost key nameplates. National Automobile Dealers Association officials had been hopeful that the practice, all but abandoned in recent years as inventory dried up, would stay dead.
Ford, in a statement provided by a spokesperson Thursday, said it “routinely” adjusts incentives for dealerships “to remain competitive.”
F-Series sales fell 10 percent in the first-quarter to 152,943. The automaker does not reveal how many of those were F-150s, though it said sales of the F-150 Lightning jumped 80 percent to 7,743.
Freshened 2024 gasoline and hybrid F-150s have been slow to reach dealerships, as the company has stocked them on holding lots around the Detroit area for extended quality checks. Michael Ward, an analyst with Freedom Capital Markets, wrote in an investor note this week that Ford delayed delivery and revenue recognition of 60,000 pickups into the second quarter because of a components issue.
Rhett Ricart, a high-volume Ford dealer and former NADA chairman who has been outspoken in his opposition to stair-steps, said he’s concerned that customers could be upset if prices fluctuate quickly, since dealerships are motivated to discount F-150s late in the month to hit their targets and receive the bonus.
“Why cause confusion among the dealers and customers because they won’t know what the price will be week to week? That’s what it is with stair-steps,” Ricart said. “If you want to sell a vehicle, just put the money on the hood and let the customer know what the money is, and they’ll buy it. I just want transparency.”
Ricart, CEO of Ricart Automotive Group in Columbus, Ohio, said F-150 sales picked up in March, although he mostly attributes that to normal seasonality.
“I don’t think it was as much the stair-steps for us as it was pent-up demand from January and February,” he said.
Nick Anderson, general manager of Chuck Anderson Ford in Excelsior Springs, Mo., said the F-150 stair-step is, in theory, a good program if implemented with realistic goals, but he’s concerned about the potential for confusion.
“My main goal is for the customer to 100 percent understand everything,” Anderson said. “When manufacturers have these hidden offers that the dealership is aware of but the customer doesn’t understand, I think it hurts the relationship between the consumer base and the dealer body. Manufacturers are never really on the hook to explain anything.”
The benefit of the program, he said, is that dealers can use their bonus money to give back to customers or to sweeten offers to buyers on the fence. Anderson said he’s received between $4,000 and $10,000 the past few months and used the extra money to make more aggressive trade-in offers.
“I do like that they give the dealer the ability to have discretionary spending,” he said. “In March, three of the trucks I sold I wouldn’t have gotten unless I [overpaid] on trades. So basically, I gave it back to those customers to get their business.”