Are we approaching 'peak pickup'?
Skip to main content
Sister Publication Links
  • Automotive News Canada
  • Automotive News Europe
  • Automotive News China
  • Automobilwoche
AN-LOGO-BLUE
Subscribe
  • Subscribe
  • Account
  • login
  • HOME
  • NEWS
    • Dealers
    • Automakers & Suppliers
    • News by Brand
    • Cars & Concepts
    • Coronavirus Coverage
    • China
    • Shift
    • Mobility Report
    • Special Reports
    • Digital Edition Archive
    • This Week's Issue
    • VW badges rtrs web.jpg
      VW Group operating profit drops by half in 2020
      Washington Auto Show postponed amid ongoing COVID-19 pandemic
      Subaru expands Feeding America donation, advertising
      Mass. dealership group to pay $1 million in unemployment scheme settlement
    • Nissan flips the switch on electric reboot
      Faraday Future moves forward with EV project, will enlist Geely's help, report says
      Audi to build EVs at new company majority owned by VW Group
      European Chamber rules out American, European export curbs as cause of chip shortage
    • Detroit Aerial Panorama during sunset
      Developing future workers to fuel growth in mobility
      Getting around in Las Vegas often involves long waits for a crowded monorail ride, below, or taking escalators up and down to cross elevated pedestrian walkways along the Strip.
      Las Vegas offers best and worst in transportation challenges
      In pandemic environment, RV industry ‘roaring back'
      Where is transportation headed?
    • Ford's Spin, Tortoise partner to launch e-scooters with remote operation capabilities
      Baidu gets Calif. nod to test driverless cars
      Lime scooters await riders
      Lime plans to add moped-sharing to scooter, bike services
      TuSimple's self-driving commerical truck
      Aeva to supply lidar sensors for TuSimple's self-driving trucks
    • Elon Musk interview
      Tesla’s Model Y, on sale since March, is a showcase of EV technologies competitors will benchmark.
      Technologies of Electrification
      Cadillac’s Lyriq EV will be unveiled Aug. 6.
      Future Product Pipeline
      A CALL TO ACTION
    • 8 rites of winter (and spring) lost to the pandemic
      GM, Ford finally get some love on Wall St.
      Stellantis is born into a new world
      Dealers call on Nissan to revive Xterra
    • Access F&I
    • Fixed Ops Journal
    • Marketing
    • Used Cars
    • Retail Technology
    • Sales
    • Best Practices
    • Dealership Buy/Sell
    • NADA
    • NADA Show
    • Automakers
    • Manufacturing
    • Suppliers
    • Regulations & Safety
    • Executives
    • Talk From The Top
    • Leading Women Network
    • Guide to Economic Development
    • PACE Awards
    • Management Briefing Seminars
    • World Congress
    • Aston Martin
    • BMW
      • Mini
      • Rolls-Royce
    • Daimler
      • Mercedes Benz
      • Smart
    • Fiat Chrysler
      • Alfa Romeo
      • Chrysler
      • Dodge
      • Ferrari
      • Fiat
      • Jeep
      • Maserati
      • Ram
    • Ford
      • Lincoln
    • General Motors
      • Buick
      • Cadillac
      • Chevrolet
      • GMC
      • Holden
    • Honda
      • Acura
    • Hyundai
      • Genesis
      • Kia
    • Mazda
    • McLaren
    • Mitsubishi
    • Nissan
      • Infiniti
    • PSA
      • Citroen
      • Opel
      • Peugeot
    • Renault
    • Subaru
    • Suzuki
    • Tata
      • Jaguar
      • Land Rover
    • Tesla
    • Toyota
      • Lexus
    • Volkswagen
      • Audi
      • Bentley
      • Bugatti
      • Lamborghini
      • Porsche
      • Seat
      • Skoda
    • Volvo
    • (Discontinued Brands)
    • Virtual reveals (Sponsored)
      • GENESIS: 2021 GV80
      • KIA: 2021 K5
      • LEXUS: 2021 IS
      • NISSAN: 2021 Rogue
      • TOYOTA: 2021 Venza and 2021 Sienna
    • Auto Shows
      • Detroit Auto Show
      • New York Auto Show
      • Los Angeles Auto Show
      • Chicago Auto Show
      • Geneva Auto Show
      • Paris Auto Show
      • Frankfurt Auto Show
      • Toronto Auto Show
      • Tokyo Auto Show
      • Shanghai Auto Show
      • Beijing Auto Show
    • Future Product Pipeline
    • Photo Galleries
    • Car Cutaways
    • Design
  • OPINION
    • Blogs
    • Cartoons
    • Keith Crain
    • Automotive Views with Jason Stein
    • Columnists
    • China Commentary
    • Editorials
    • Letters to the Editor
    • Send us a Letter
    • Forget the Ford GT; Moray Callum's biggest hit is the aluminum F-150
      Nikon turns lens on auto factory, build quality
      Bosch_information_domain_computer web.jpg
      Bosch, Continental battle to supply the brain of the connected car
      A victory lap for Detroit car design
    • view gallery
      1 photos
      As Many As The Stars
      view gallery
      1 photos
      A New GM
      view gallery
      1 photos
      The Bridge
      view gallery
      12 photos
      Leo Michael's best of 2020
    • Shifting gears away from the stick shift
      SEMA still a wonderful circus
      Penske still has plenty of races to win
      Ford's turn in the hot seat
    • January 26, 2021 | Will EVs finally find their footing?
      January 19, 2021 | Small car part causes big problem
      January 12, 2021 | Automotive industry shined in 2020
      December 8, 2020 | In a year that lacked luster, All-Stars showed how to shine
    • Jamie Butters
      Tavares knows that he's a star
      Darren Militscher
      Time for new pre-owned pricing tack
      Leo Michael
      Out with the tie, in with the teeth
      4 myths that threaten dealers
    • How Tesla, GM transformed EV market in 2020
      Is sales recovery nearing an end?
      Beijing's uphill battle to boost EV sales
      Nasdaq-like Star Board poised to become key finance platform
    • Used-car biz not getting easier, but it's better
      EV charging
      Time for U.S. to embrace the EV
      Ford's ‘Finish Strong' ad sets right tone for '21
      UAW settlement brings justice, voting rights
    • Is banning ICEs in our best interests?
      GM should share EV risk with dealers
      Ready to buy Mirai, but where to fuel?
      From Toyota store to hydrogen highway
  • DATA CENTER
  • VIDEO
    • AutoNews Now
    • First Shift
    • Special Video Reports
    • Weekend Drive
    • AutoNews Now: Feds rap FCA leaders as company agrees to plead guilty in UAW probe
      AutoNews Now: GM to use Qualcomm's cockpit, driver-assistance chips
      AutoNews Now: Volkswagen talking with suppliers about microchip compensation
      AutoNews Now: Tavares to have 38 direct reports at Stellantis
    • First Shift: Kia dropping two sedans from U.S. lineup
      First Shift: Biden vows to swap federal government's fleet with EVs
      First Shift: Nissan dealers want Xterra's return
      First Shift: Ford prices Takata recall at $610M
    • N.J. dealer helps position peers for ‘electric revolution’
      DCH Millburn Audi
      'Finding the diamond in the rough': How 2020's No. 1 dealership retains talent
      Don Johnson Motors
      'Distinctive culture' cuts turnover, carves career paths at Wis. dealership group
      Why 2020 could be a record year for buy-sells
    • Why the pickup is the auto industry's 'battleground'
      Carlos Ghosn's quest to restore his reputation
      Why Ford must execute to avoid 'deep trouble'
      Why Honda is 'locked and loaded' for 2020
  • EVENTS & AWARDS
    • Events
    • Awards
    • Congress Conversations
    • Retail Forum: NADA
    • Canada Congress
    • Europe Congress Conversations
    • Leading Women Conference
    • Fixed Ops Journal Forum
    • ANE Shift
    • Shift: Mobility at a Crossroads
    • Shift: The Future of Mobility (CES)
    • 100 Leading Women
    • 40 Under 40 Retail
    • All-Stars
    • Best Dealerships To Work For
    • PACE Program
    • Rising Stars
    • Europe Rising Stars
  • JOBS
  • AN Solutions
  • +MORE
    • Leading Women Network
    • Podcasts
    • Webinars
    • In the Driver's Seat
    • Publishing Partners
    • Classifieds
    • Companies on the Move
    • People on the Move
    • Newsletters
    • Contact Us
    • Media Kit
    • RSS Feeds
    • Shift: A Podcast About Mobility
    • Special Reports Podcasts
    • Daily Drive Podcasts
    • AAM
    • Gentex
    • Reputation.com
    • Ricardo
    • Ricardo
    • Allstate: Want more from your F&I?
    • Ally: Navigating the future of automotive retailing
    • Amazon Web Services: Any place, any time, any channel
    • Amazon Web Services: The power of the cloud
    • Amazon Web Services: Universal translator: Harnessing sensor data to build better automotive software
    • Epic Games: Transforming the auto industry with digital assets
    • FTI Consulting: Crisis as a catalyst for change
    • Google: 5 trends shaping the auto industry's approach to a new normal
    • IHS Markit: Automotive loyalty in the wake of the COVID-19 recession
    • IHS Markit: Autonomous vehicles: Automotive and transportation disruption
    • IHS Markit: COVID-19: The future mobility delusion
    • IHS Markit: The battery electric vehicle (BEV)
    • Level5: 2020 Automotive E-Commerce Report
    • Naked Lime: Bring social reputation together as part of big-picture marketing
    • Wells Fargo Auto: Switching gears from LIBOR to SOFR
    • Ally: Do It Right
    • DealerSocket
    • Deloitte: Cyber everywhere: Preparing for automotive safety in the face of cyber threats
    • Facebook: The road to a zero-friction future
    • Guide To Economic Development
    • PayPal Credit: How consumer financing helps drive sales for online auto parts retailers
MENU
Breadcrumb
  1. Home
  2. Automakers & Suppliers
May 09, 2016 01:00 AM

Are we approaching 'peak pickup'?

Detroit 3's added capacity stirs fears over pricing, profit

  • Tweet
  • Share
  • Share
  • Email
  • More
    Print
    Big haul
    Growth in average transaction prices for full-size pickups far outpaces the industry overall. Average transaction price with annual increase listed below.
    Full-size pickups
    2011$33,5112.90%
    2012$34,8394.00%
    2013$36,1993.90%
    2014$38,6226.70%
    2015$40,5375.00%
       
    All light vehicles
    2011$28,3372.50%
    2012$28,5860.90%
    2013$29,3282.60%
    2014$29,9872.20%
    2015$30,6062.10%
    Source: J.D. Power and Associates

    DETROIT -- One look at April's results leaves little doubt about why each of the Detroit 3 is scrambling to build more pickups.

    Full-size pickup sales shot up nearly 10 percent last month and are up nearly 7 percent for the year. Average transaction prices continued marching higher -- up 5 percent for the year through mid-April, to $41,543, J.D. Power data show. Inventories remain tame by historical standards.

    Straining to keep their big-gest profit engine humming, Fiat Chrysler Automobiles, Ford and, to a lesser extent, General Motors are mobilizing to make more. In all, they are on track to boost total capacity by about 5 percent, or an extra 125,000 pickups, by 2017, IHS Automotive estimates.

    But some industry pundits worry they'll be ramping up production just as the market is peaking.

    They point to the slowing growth of the overall market and additional downside risk from weakening demand in Texas and other oil- and gas-producing regions.

    "We believe capacity [additions] in a flattish demand environment will pose downside risks to large pickup/SUV" pricing and in turn could sap profits at the Detroit 3, Barclays Capital analyst Brian Johnson wrote in a March research note.

    For many months, industry insiders have debated how much longer the record light-vehicle sales run will last. But whether the stout pickup market still has legs probably matters more to GM, Ford and FCA because of its outsize profits. Pickups alone account for 55 to 67 percent of North American operating profit at GM and Ford, according to a Citigroup Inc. report last week.

    Building more pickups will pay off only if demand keeps growing, or at least stays steady. If not, those extra trucks could disrupt the Detroit 3's "oligopolistic" pricing power and cut into profits, Johnson says. He estimates that by the end of next year, GM could face losing $1 billion to $2 billion in annual profit from weaker pricing and market share amid Ford's and Ram's production boosts.

    Others, too, are eyeing the pending capacity additions with apprehension.

    "When you enjoy superordinate profits, additional capacity comes in and erodes it," says Susquehanna Financial Group analyst Matthew Stover. "It's a legitimate concern."

    For now, the Detroit 3 seem more concerned about cashing in on the booming pickup market than oversaturating it.

    Ford is thought to have expanded its pickup capacity by as much as 10 percent through a more-flexible shift schedule installed for the changeover to its redesigned F-150, launched in late 2014, and through the addition of Super Duty chassis cab production this year at its Avon Lake, Ohio, plant.

    Joe Hinrichs, Ford's president of the Americas, sees it as a simple supply-and-demand issue.

    "We took the best truck and made it even better, and the customers have been willing to pay for that," he told Automotive News last month. "The demand from the dealers has been greater than what we've been supplying."

    GM executives have said they're increasing pickup production but haven't publicly detailed how. They don't see any of the telltale signs that the pickup market will downshift anytime soon. Average transaction prices have been steady, even as the current generations of the Chevy Silverado and GMC Sierra surpass middle age. Inventories and incentives have been held in check. And economic underpinnings remain solid.

    "All of these are indicators that should really sustain the pickup market," GM spokesman Jim Cain said.

    The biggest threat to pricing power might come from FCA's planned production expansion, analysts say. Stover views FCA as the wild card because it has the biggest opportunity to increase capacity significantly through a massive reshuffle of its pickup factories as soon as late 2016, in anticipation of the launch of the redesigned Ram 1500 in early 2018.

    IHS expects FCA to boost its straight-time full-size pickup production capacity by 22 percent by 2018, to 620,000 units, although some of that extra breathing room could simply allow FCA to operate more efficiently, rather than maximize production.

    Not everyone is worried. Citigroup analyst Itay Michaeli estimates that pickup capacity has fallen 15 percent since 2007. He posits that the industry was too quick to succumb to the notion that many truck buyers left the market for good amid the Great Recession.

    "We think the story continues to revolve around a unique supply/demand imbalance caused by ... too aggressive capacity cuts in 2008-09," Michaeli wrote in a March report.

    At Banner Chevrolet in New Orleans and sibling store Banner Ford, just outside the city, the hit to the area's oil industry has sapped pickup business, dealer Rick Flick says. Inventory at the Ford store has crept higher in recent months, but the Chevy store could use a few more trucks.

    One trend that could give pause to Detroit 3 execs: Used pickups are selling faster than new ones, Flick says.

    "Prices on new trucks have gotten so high that I think buyers are just more price-conscious," Flick says. "Used trucks are gold right now."

    Nick Bunkley and Larry P. Vellequette contributed to this report.

    RECOMMENDED FOR YOU
    Tesla Q4 net income rises to $270M, capping full-year profit
    Letter
    to the
    Editor

     

     

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    Tesla Q4 net income rises to $270M, capping full-year profit
    Tesla Q4 net income rises to $270M, capping full-year profit
    BMW cash flow beats estimates on China recovery, used-car sales
    BMW cash flow beats estimates on China recovery, used-car sales
    GM partners with Navistar to power fuel cell semitrucks
    GM partners with Navistar to power fuel cell semitrucks
    Sponsored Content: VIDEO: Ricardo’s U.S. head talks new tech, electrification and autonomous vehicles
    Sign up for free newsletters
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    See more newsletter options at autonews.com/newsletters.

    You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.

    Digital Edition
    Automotive News 1-25-21
    THIS WEEK'S EDITION
    See our archive
    Fixed Ops Journal
    Fixed Ops Journal 12-14-20
    Read the issue
    See our archive
    BREAKING NEWS ALERTS: Sign up and be the first to know when big news breaks.
    WEEKLY NEWSLETTER: Sign up to start your week with the top stories from the latest issue of Automotive News, delivered to your inbox first thing each Monday morning.
    Get Free Newsletters

    Sign up and get the best of Automotive News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today

    Get 24/7 access to in-depth, authoritative coverage of the auto industry from a global team of reporters and editors covering the news that’s vital to your business.

    Subscribe Now
    Connect With Us
    • Facebook
    • Instagram
    • LinkedIn
    • Twitter

    Our mission

    The Automotive News mission is to be the primary source of industry news, data and understanding for the industry's decision-makers interested in North America.

    AN-LOGO-BLUE
    Contact Us

    1155 Gratiot Avenue
    Detroit, Michigan
    48207-2997

    (877) 812-1584

    Email us

    Automotive News
    ISSN 0005-1551 (print)
    ISSN 1557-7686 (online)

    Fixed Ops Journal
    ISSN 2576-1064 (print)
    ISSN 2576-1072 (online)

    Resources
    • About us
    • Contact Us
    • Media Kit
    • Subscribe
    • Manage your account
    • Reprints
    • Ad Choices Ad Choices
    • Sitemap
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Automotive News
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • HOME
    • NEWS
      • Dealers
        • Access F&I
        • Fixed Ops Journal
        • Marketing
        • Used Cars
        • Retail Technology
        • Sales
        • Best Practices
        • Dealership Buy/Sell
        • NADA
        • NADA Show
      • Automakers & Suppliers
        • Automakers
        • Manufacturing
        • Suppliers
        • Regulations & Safety
        • Executives
        • Talk From The Top
        • Leading Women Network
        • Guide to Economic Development
        • PACE Awards
        • Management Briefing Seminars
        • World Congress
      • News by Brand
        • Aston Martin
        • BMW
          • Mini
          • Rolls-Royce
        • Daimler
          • Mercedes Benz
          • Smart
        • Fiat Chrysler
          • Alfa Romeo
          • Chrysler
          • Dodge
          • Ferrari
          • Fiat
          • Jeep
          • Maserati
          • Ram
        • Ford
          • Lincoln
        • General Motors
          • Buick
          • Cadillac
          • Chevrolet
          • GMC
          • Holden
        • Honda
          • Acura
        • Hyundai
          • Genesis
          • Kia
        • Mazda
        • McLaren
        • Mitsubishi
        • Nissan
          • Infiniti
        • PSA
          • Citroen
          • Opel
          • Peugeot
        • Renault
        • Subaru
        • Suzuki
        • Tata
          • Jaguar
          • Land Rover
        • Tesla
        • Toyota
          • Lexus
        • Volkswagen
          • Audi
          • Bentley
          • Bugatti
          • Lamborghini
          • Porsche
          • Seat
          • Skoda
        • Volvo
        • (Discontinued Brands)
      • Cars & Concepts
        • Virtual reveals (Sponsored)
          • GENESIS: 2021 GV80
          • KIA: 2021 K5
          • LEXUS: 2021 IS
          • NISSAN: 2021 Rogue
          • TOYOTA: 2021 Venza and 2021 Sienna
        • Auto Shows
          • Detroit Auto Show
          • New York Auto Show
          • Los Angeles Auto Show
          • Chicago Auto Show
          • Geneva Auto Show
          • Paris Auto Show
          • Frankfurt Auto Show
          • Toronto Auto Show
          • Tokyo Auto Show
          • Shanghai Auto Show
          • Beijing Auto Show
        • Future Product Pipeline
        • Photo Galleries
        • Car Cutaways
        • Design
      • Coronavirus Coverage
      • China
      • Shift
      • Mobility Report
      • Special Reports
      • Digital Edition Archive
      • This Week's Issue
    • OPINION
      • Blogs
      • Cartoons
      • Keith Crain
      • Automotive Views with Jason Stein
      • Columnists
      • China Commentary
      • Editorials
      • Letters to the Editor
      • Send us a Letter
    • DATA CENTER
    • VIDEO
      • AutoNews Now
      • First Shift
      • Special Video Reports
      • Weekend Drive
    • EVENTS & AWARDS
      • Events
        • Congress Conversations
        • Retail Forum: NADA
        • Canada Congress
        • Europe Congress Conversations
        • Leading Women Conference
        • Fixed Ops Journal Forum
        • ANE Shift
        • Shift: Mobility at a Crossroads
        • Shift: The Future of Mobility (CES)
      • Awards
        • 100 Leading Women
        • 40 Under 40 Retail
        • All-Stars
        • Best Dealerships To Work For
        • PACE Program
        • Rising Stars
        • Europe Rising Stars
    • JOBS
    • AN Solutions
    • +MORE
      • Leading Women Network
      • Podcasts
        • Shift: A Podcast About Mobility
        • Special Reports Podcasts
        • Daily Drive Podcasts
      • Webinars
      • In the Driver's Seat
        • AAM
        • Gentex
        • Reputation.com
        • Ricardo
        • Ricardo
      • Publishing Partners
        • Allstate: Want more from your F&I?
        • Ally: Navigating the future of automotive retailing
        • Amazon Web Services: Any place, any time, any channel
        • Amazon Web Services: The power of the cloud
        • Amazon Web Services: Universal translator: Harnessing sensor data to build better automotive software
        • Epic Games: Transforming the auto industry with digital assets
        • FTI Consulting: Crisis as a catalyst for change
        • Google: 5 trends shaping the auto industry's approach to a new normal
        • IHS Markit: Automotive loyalty in the wake of the COVID-19 recession
        • IHS Markit: Autonomous vehicles: Automotive and transportation disruption
        • IHS Markit: COVID-19: The future mobility delusion
        • IHS Markit: The battery electric vehicle (BEV)
        • Level5: 2020 Automotive E-Commerce Report
        • Naked Lime: Bring social reputation together as part of big-picture marketing
        • Wells Fargo Auto: Switching gears from LIBOR to SOFR
        • Ally: Do It Right
        • DealerSocket
        • Deloitte: Cyber everywhere: Preparing for automotive safety in the face of cyber threats
        • Facebook: The road to a zero-friction future
        • Guide To Economic Development
        • PayPal Credit: How consumer financing helps drive sales for online auto parts retailers
      • Classifieds
      • Companies on the Move
      • People on the Move
      • Newsletters
      • Contact Us
      • Media Kit
      • RSS Feeds