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Insight: The Revival of the Full-Size Pickup Truck Market

With all the attention being paid to small cars, it's appropriate to pause and take stock of the situation for the vehicle at the other end of the weight ratings, the mighty pickup truck.

With all the attention being paid to small cars, it's appropriate to pause and take stock of the situation for the vehicle at the other end of the weight ratings, the mighty pickup truck. Dead or dying in this time of ongoing economic uncertainty and calls for independence from foreign oil? As a matter of fact, no.

Industry participants pay particular attention to pickup trucks for a variety of reasons. The U.S. automakers love them because they are highly profitable and have continued to be an area of undisputed strength for the Detroit Three compared to their Asian rivals. Suppliers value truck programs because they offer huge volumes­—a component on a Ford F-Series pickup platform could mean 500,000 units in a bad year and hundreds of thousands more when things are going well. Pickup trucks, at about 15% of total North American production, are one of the largest vehicle segments. All indicators are that they will stay that way.

It's true that the market for pickup trucks has been affected directly by the economic downturn. A sizable number of pickup trucks go to building contractors and other commercial users, and as the accompanying chart shows, U.S. pickup truck sales track closely with new home starts in bad times and in good. Although housing is still struggling to show a consistent recovery, the numbers are back up. According to reported results for January through August, full-size pickup truck sales in the U.S. were up 16% over the same period last year.

There is an element of the pickup truck market that we believe was altered for the long term, if not permanently, by the economic crisis. CNW Research (cnwmr.com) collects data on pickup truck sales by primary use, and reports that contractors, agriculture, and fleets account for the majority of sales, but two other segments are purely consumer-driven: those who buy a pickup to tow a boat or RV, and those who buy for "appearance" reasons—i.e., no functional purpose but for the sake of image. Interestingly, in 2001, CNW reports that Appearance buyers constituted 28.1% of all U.S. pickup truck purchases, an astonishing number and reflective of the times when it was considered reasonable to pay up to $40,000 for a full-size pickup to haul nothing more than groceries. In 2009, however, only 8.6% of pickup truck customers fell into the Appearance segment. The RV/Tow segment also fell from a range of 10 to 14% of all pickup truck buyers to 5.5% in 2009, since sales of discretionary items like boats and campers have also been hard-hit by the economy. The RV/Tow buyers will come back, but we do not expect the pure Appearance segment of the market to ever return to its former share.

The resilience of pickup trucks is evidenced by the fact that the Ford F-150 and Chevrolet Silverado were among the top 10 models sold in the Cash for Clunkers program during the summer of 2009. The assumption was that big old cars would be turned in for snappy fuel-efficient subcompacts, but the reality was a little more diverse. The parameters of the program allowed for the differential in fuel economy between an old pickup and a new one to qualify as enough of an environmental improvement to merit the government incentive.

North American sales of full-size pickups went from almost 2.4-million units in 2007 to 1.3-million in 2009. Production of pickup trucks suffered a similarly gut-wrenching decline, from 2.5-million units assembled in North America in 2007 to 1.3-million last year. IRN is forecasting an uptick to over 1.6-million full-size pickups in 2010 and over 1.7-million in 2011 (see table).

Major factors contributing to these increases include:

  • Stabilization and then a rebound in construction markets (both commercial and residential)
  • Robust engine development programs at all OEMs to drive compliance with future fuel economy and emissions regulatory requirements
  • Relatively reasonable gasoline prices for the foreseeable future
  • Pent-up demand as commercial owners churn through the shorter life cycle on their models and the bulge of trucks coming off lease in the past couple years is absorbed
  • Dedicated buyers: Consumer research shows that pickup drivers are among the least likely to consider downsizing to a smaller vehicle

Models that are the stalwarts of this segment are the Ford F-Series pickups, the Chevrolet Silverado/GMC Sierra, and the Dodge Ram. All-new versions of the GM pickups are expected in mid-2012 and of the F-Series in mid-2013, so truck buyers have much to look forward to. Among the New Domestics, the full-size pickup offering is less compelling. Toyota's Tundra operates at a fraction of the market presence that the company enjoys in other segments, and no major model change is planned until 2013 so we do not see much share growth in its near future. Honda's Ridgeline pickup is somewhat undersized and underpowered for the mainstream pickup buyers, and Nissan is behind the curve with its own product since its agreement with Chrysler to re-badge the Ram as a Nissan Titan pickup was scrapped when Fiat took over. Nissan has decided to go it alone and will introduce a new pickup in 2014—a statement that the market segment is too good to give up on.

So, as a result of the investment by the Detroit Three, gradually improving economic conditions, and loyal commercial customers, we can look for the full-size pickup truck segment to survive and prosper, much to the relief of GM, Ford and Chrysler. 

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