Pickup Makers Are Betting $45 Billion on Your Infidelity
Pickup Makers Are Betting $45 Billion on Your Infidelity
(Bloomberg) -- The folks who drive pickup trucks are an ardent, consistent lot. They stick to the brand they like more than those who own SUVs, minivans or any other type of vehicle. They are, however, human, and the heart wants the half-ton that it wants, as the saying goes.
This week at the North American International Auto Show in Detroit, each of Detroit’s Big Three—Fiat Chrysler Automobiles NV, Ford Motor Co. and General Motors Co.—is showing off a pickup in the hopes of tempting customers wedded to a rival, or at the very least keeping its own drivers from straying. Pickups are immensely profitable, with each sold carrying about $10,000 in profit. With that kind of black ink at stake, auto executives have been questioning just how loyal the typical pickup owner truly is.
When it comes to full-size rigs, roughly half of truck owners re-upped last year, trading in a full-size pickup and buying another rig from the same brand, according to Edmunds.com Inc. Another way to look at it? Some 50 percent of these drivers are ready for a fling, which means that in the $90 billion U.S. truck market, $45 billion is in play.
And that estimate may be conservative. In a recent survey by digital marketplace CarGurus Inc., 60 percent of truck owners said they would be open to switching brands. When price was factored in, that figure rose to 71 percent. In other words, there’s a reason why Tesla Inc., the ultimate left coast brand, is so popular in blood-red Texas, where one in five U.S. pickups are bought. These truck customers are far more idiosyncratic—some would say irrational—than they seem.
This year, pickup buyers are getting more capricious by the day. TrueCar Inc. senior analyst Eric Lyman said the strongest factor in brand loyalty has been employment. Those whose livelihood depends on a pair of boots or a set of tools have a deeper relationship with those things—and a deeper investment. The same goes for a 5,000-pound machine.
“The day your truck stops working is the day you’re not going to get paid,” Lyman said.
In recent years, though, a larger share of truck buyers don’t drive them to a job site, or even take the cover off the bed. Only about one-quarter of pickup owners use the rig for work, according to CarGurus. For others, it’s become the four-wheeled equivalent of a cowboy hat.
Ford was one of the first to figure this out. Thanks in part to these weekend warriors, sales of the F-150, Ford’s flat-bed moneymaker, have steadily risen, driving a market share that now hovers close to 40 percent. “Many of the customers today—the people who are towing that boat, that camper—that’s important to who they are,” said Todd Eckert, marketing manager of Ford’s trucks. “While it may not be part of their work life, it’s part of their life.”
At the Detroit auto show, GM counterattacked. It rolled out an all-new Chevrolet Silverado, which was last overhauled 10 years ago. The latest iteration comes in eight different trims—from bare-bones to something approximating the opulent Cadillac Escalade. It’s powered by a choice of two new V-8 engines that will idle all but one cylinder at times to improve fuel efficiency. The rig is also up to 450 pounds lighter, an answer to Ford’s recent focus on better mileage.
Fiat-Chrysler, meanwhile, unveiled a more posh version of its Ram 1500. With a 12-inch touchscreen, the ability to park itself and noise-canceling technology, the former Dodge brand may find some pricing power as it continues to slog away in third place. It also comes with some nifty tricks, including active air vents on the grille to make the machine more aerodynamic and a small electric motor to boost torque.
In the end, Ford still stands to gain the most—with its new Ranger. The company is alone among the Big Three in adding a new model rather than replacing one.
Ford hasn’t offered a midsize pickup in the U.S. since 2011, no doubt because it didn’t want to cannibalize the F-150 and risk its perpetual crown as best-selling vehicle in America. In the process, GM managed to build an $18 billion business in the not-giant truck space.
Critically, however, the new Ranger is smaller and more affordable than its beefy sibling—a starter truck, if you will—better suited to younger, less affluent drivers and city folk who still need to squeeze into curbside parking. “What really will set apart a moderate success vs. a tremendous success is the ability to conquer those first-time pickup buyers,” Lyman said.
If all goes as planned at Ford, this year’s Ranger customers are likely to trade up to an F-150 in a few years—unless, of course, they are tempted by something else.
To contact the editor responsible for this story: David Rovella at drovella@bloomberg.net.
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