DETROIT -- Skeptics of General Motors' decision to revive its smaller pickups say GM is headed down a dead-end road: Buyers simply prefer to pay a bit more and get a bigger truck, the thinking goes.
But an Automotive News review of more than a decade of pricing, inventory and sales data shows that market dynamics have shifted in the years since compact pickups (now commonly called mid-sized) fell out of favor. The pricing delta between the smaller trucks and their bigger showroom siblings has widened considerably in recent years, creating more breathing room for mid-sized offerings priced from $20,000 to the low $30,000s.
The data suggest that GM's contrarian move to re-enter the segment this fall with the new Chevrolet Colorado and GMC Canyon comes at an opportune time.
The move is still a gamble -- one that GM's main truck rivals see no reason to take for now -- given the epic collapse of the smaller-pickup market during the past 15 years.
Smaller trucks such as the Ford Ranger and Chevy S-10 were the rage in the 1990s, outselling full-sized pickups in some years. Then, steep discounts on the bigger trucks, lubricated by overproduction, shortened the pricing ladder between the two segments. Encouraged by cheap gasoline prices, buyers opted for more truck.
As a result, U.S. sales of compact pickups shriveled to just 227,111 trucks last year, from more than 1 million in 2000, according to the Automotive News Data Center.
But in recent years, restrained production and insatiable demand for content and features on full-sized pickups have tamed discounts and pushed prices to gaudy highs. Net prices -- average transaction prices that factor in incentives such as lease subsidies and cheap financing -- hit a record $37,568 in the first half of the year, Edmunds data prepared for Automotive News show.
From 2011 through the first half of 2014, net prices on full-sized pickups were 43 percent higher on average than on mid-sized trucks. That's a sizable jump from the nine-year period from 2002 to 2010, when they were 34 percent higher on average. The gap could grow in coming years as Ford leads what is likely a broader transition to more-expensive aluminum bodies to improve fuel economy. Ford is raising prices for its 2015 aluminum F-150 pickup by as much as $3,615.
"We've seen [full-sized] truck prices rise so much in recent years, it does leave a void in the market for smaller trucks with decent content and amenities," Edmunds senior analyst Jessica Caldwell says. "The timing is as good as it's been in at least a decade."
The base 2015 Colorado -- an extended cab with a 2.5-liter, 200-hp, four-cylinder engine and a manual transmission -- will sticker for $20,995, including shipping. That's about $9,700 less than the same trim-level Silverado in the same cab style, and about $5,600 less than the cheapest Silverado available, which is a regular cab.
Dealers lauded GM's pricing strategy for the trucks, following several recent launches that have drawn grumbles of overpricing, such as last year's rollouts of the 2014 Silverado and Impala sedan.
"We could do very well with those kind of price points," said Greg Williams, sales manager at Rentschler Chevrolet in Slatington, Pa.
It was a different story when GM launched the first-generation Colorado and Canyon in 2004, as successors to the popular S-10 and GMC Sonoma. Back then, a top-trim 2005 Colorado Z71 crew cab was $28,550, about $6,200 cheaper than a Silverado Z71 crew cab. For 2015, the gap between those models is more than $11,000.
Rick Cantalini, general manager at Vandergriff Chevrolet in Arlington, Texas, was on a dealer advisory committee for the first Colorado. He says it was a decent truck but never sold well because "the way Silverado was priced, they were stepping all over each other."
Today, GM has "stayed restrained on Silverado rebates" for the redesigned truck, Cantalini says. "They've preserved that space for Colorado."
GM must maintain that discipline to avoid the price blurring of the past, says AutoPacific Inc. product analyst Dave Sullivan. He believes having an adequate price spread is crucial to GM's strategy of being the only automaker to offer all three flavors of pickups: mid-sized, and full-sized trucks in both light- and heavy-duty versions.
Some analysts have cautioned that the Colorado and Canyon could siphon sales of the Silverado and Sierra, which combined are GM's highest-volume U.S. nameplates and among its most profitable. But that could actually help the bottom line: A Colorado or Canyon in a mid-level trim with a few options will carry a higher incremental profit margin than a stripped-down Silverado or Sierra, according to a person with knowledge of the matter.
For now, forecasters are taking a cautious view of GM's mid-sized truck gambit. Forecasts for combined sales of the Colorado and Canyon next year, by IHS Automotive, AutoPacific and LMC Automotive, range from 73,000 to 91,400 trucks. That is well below the historical volume of the Toyota Tacoma, which has accounted for about two-thirds of mid-sized sales in recent years, and a fraction of the combined 664,803 Silverados and Sierras sold last year.
GM officials won't provide a sales target. But they say they're trying to fix another problem that contributed to the sales plunge in smaller trucks: dated products with scant features and content.
Even before 2011, when Ford ended production of the Ranger and Chrysler nixed the Dodge Dakota, none of the Detroit 3 had invested much to keep their smaller pickups fresh. And even the Tacoma has made do with minor face-lifts since its last redesign, in 2004.
Colorado marketing manager Tony Johnson says buyers ended up migrating "into segments where they were getting the refinement and the technology they wanted, the latest and greatest stuff."
GM hopes the Colorado and Canyon will lure them back -- out of full-sized trucks such as the F-150, SUVs and even crossovers -- with sleek designs, quiet interiors and better fuel economy. GM is expected to release EPA ratings for the trucks later this month.