Will The Pickup Truck Boom Last?

Pickup truck sales are surging in the US. Sales are up 78% for the year, helped along by a 10% rise in April. Even better news for the Big 2½ automakers is that the average sale price of those pickups is 5% higher this year — $41,543 according to J.D. Power.

PIckup truck sales are booming

To cash in on the boom, manufacturers are planning to boost production capacity by an average of 5%. FCA will lead the way. It says it can increase production by 22% if necessaryt. Its Dodge Ram pickup has been gaining market share ever since it introduced a diesel engine option in 2014.

The diesel powered Rams have the highest EPA highway mpg ratings at the moment, but Ford and GM are straining every sinew to catch up and are spending millions of dollars to do so. They have good reason to. Pickup sales account for 55 to 67 percent of North American operating profit at GM and Ford, according to a Citigroup report that came out last week.

It is ridiculous that anyone would base a buying decision for a pickup truck that costs more than $40,000 on a mileage difference of 1 or 2 mpg, but people do. The manufacturers help build the illusion that their pickups are actually earth friendly by putting badges on the outside that say things like “EcoBoost” or “EcoDiesel.” People buy on emotion and justify their decision later with facts. Boosting EPA fuel economy ratings can mean millions in extra profits.

Some industry analysts see bumps in the road ahead, however. “When you enjoy superordinate profits, additional capacity comes in and erodes it,” says Susquehanna Financial Group analyst Matthew Stover. “It’s a legitimate concern.”

Pickup truck sales have declined in some areas of the country where people actually use them for work. In places like Texas and the Dakotas, where low oil prices have led to a loss of jobs in the oil fields, the demand for pickup trucks has slowed.

Pickup trucks remain the poster child for America’s ambivalence about climate change. Amidst multiple warning signs that the planet is heating up faster than even the most vocal climate advocates predicted, Americans continues to drive the largest, thirstiest vehicles they can find.

Highway fuel economy ratings have little or no bearing on how much fuel these gas pigs actually consume. Virtually none of them spend time cruising billiard table flat highways at a steady 55 mph. The more representative number is city mileage.

In most cases, real drivers in real trucks in the real world are still struggling to average 20 miles per gallon. That so many pickup trucks are used to schlep kids to school, run errands, or grab a pound of  8d finish nails at Home Depot should be a national embarrassment.

Matthew Stover warns that a glut of unsold pickup trucks will slow the production of these beasts but he may be wrong about that. Once gas prices start trending up — as they always do — drivers will start howling about how they can’t afford to drive anymore and demand the government take action to restore our constitutional right to cheap gas.

Until then, we will continue to party like its 1999. And our government will continue to provide massive amounts of tax dollars to fossil fuel industries in the form of tax breaks, allowances, deductions, and regulatory blessings.

Are we starting to see the beginning of “peak pickup?” Don’t bet on it. For many Americans, you can have their pickup truck when you pry it from their cold, dead fingers.

Source: Automotive News

 

Steve Hanley

Closely following the transition from internal combustion to electricity. Whether it's cars, trucks, ships, or airplanes, sustainability is the key. Please follow me on Google + and Twitter.