US Pickup Trucks: Competition Will only Intensify

Pickup trucks and SUVs have maintained the allure of the US auto sector while the sector is sluggish. Consumers are dumping sedans for pickup trucks

Anuradha Garg - Author

Nov. 29 2019, Updated 8:07 p.m. ET


Pickup trucks and SUVs have maintained the allure of the US auto sector when the rest of the sector is sluggish. Consumers are dumping sedans to favor SUVs and pickup trucks. The top three selling vehicles in the US are pickup trucks. According to IHS Markit, pickup trucks contribute close to 15% of US vehicle sales. Moreover, the sales of these vehicles have steadily grown since 2009.

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Pickup trucks and SUVs are leading the US auto sector

It is also the most lucrative segment with good returns for automakers. Reuters reported that GM earns at least $17,000 per vehicle on large pickup trucks in pre-tax profit. The margins on higher-end models are even higher.

It is due to the lucrative structure of this segment that Ford has decided to replace 75% of its product line-up to include more SUVs and trucks. The biggest three Detroit auto players, Ford (F), General Motors (GM), and Fiat Chrysler (FCAU), dominate this segment with more than 80% market share.

Competition to intensify in the US pickup segment

Not only the competition between these three years, but the market is also expected to get even more competitive with Volkswagen (VLKAF), Hyundai, and Mitsubishi planning to launch vehicles in the truck segment in the US.

Along with the competition, trucks are evolving. While earlier trucks used to incorporate just bare minimum features to be useful for practical purposes used mainly by farmers and contractors, they now include more sophisticated features and modern technology.

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Fiat Chrysler first jumped at this opportunity. The company started offering additional features on its pickup trucks, including plush interiors and hi-tech features. CNBC reported that despite being a risk initially, this move paid off for FCAU. So much so, that now GM and Ford are trying to make similar changes to their own product lineups.

During the third quarter, sales of Fiat’s Ram trucks increased by 14% YoY (year-over-year) to 161,635 units. This was due to the 2500’s and 3500’s heavy-duty refinements. FCAU’s Ram trucks have especially taken the pickup truck segment by storm. The Ram Heavy Duty pickup truck was MotorTrend’s 2020 Truck of the Year. It has now become a serious challenger to Ford’s F-150 and GM’s Chevy.

GM and F want to play nice in the US pickup sector

The players have usually maintained that they are trying to keep the competition rational. Reuters reported GM North American operations head Barry Engle as saying, “This is a segment that has been profitable for all of us.” He added, “We’d like to keep it that way.”

Ford has been losing market share in the North American market. So, it is trying to defend the share but trying but keeping it rational. Per a Reuters’ report in June, Ford’s marketing manager Todd Eckert said, “It’s about having a balanced approach.”

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Can the competition stay rational?

However, this balanced approach doesn’t seem to be working anymore. During its third-quarter results call, Ford reported that its future outlook is getting bleaker. It cited three main reasons for this outlook. One of these factors was higher-than-planned incentives in North America.

“The competitors haven’t let us just grow that share without any fight,” said Ford’s automotive president Joseph Hinrichs about the pickup truck segment. “So we’ve seen a little bit higher incentives on Ranger than we had expected given the launch of the vehicle this year,” he added.

Electric pickup trucks to add new competition dimension

Now, the US pickup truck race is taking a new turn. Some companies are in the process of launching electric pickup trucks. Already, Ford- and Amazon- (AMZN) backed Rivian unveiled its truck, R1T. Tesla (TSLA) also unveiled its pickup truck on November 21 with mixed responses.

Also, Ford and General Motors are joining the race as they want to maintain their supremacy in this segment. Ford is expected to launch the electric version of its best-selling F-150 in 2021. GM is also planning to build its all-electric pickup truck and SUV in late 2021.


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