Truck Sales to Decline

by : Kraig Johanssen

Pickups sales have been high because they are reliable when it comes to engine power and performance. In fact, Detroit automakers are considering this type as sales and profit boosters as compared with SUVs.

In today's modern time, the pick ups evolved into more sophisticated vehicles. They now have expensive features found on cars that include leather seats, booming stereos and large passenger compartments. Moreover, pickups have also adopted the same image as SUVs and are now parked in industrialized areas - gone are the days for "construction site only parking".

Unfortunately in terms of popularity and sales, SUVs surpassed pickups. And even for companies with the newest models, truck sales have dropped while rebates and other incentives are climbing.

Two months ago, Bucky Hacker exchanged his 2002 Dodge Ram Quad Cab pickup with a subcompact car - the Mazda 3 with top of the line . A student from Oak Ridge, Tennessee, Mr. Hacker bought his Dodge vehicle to drag a boat and also to attract girls with its very masculine appearance.

But he was ridiculed. His Dodge gas consumption reached 13 miles per gallon just for towing the boat while his new Mazda averages twice that or 26 miles per gallon in city and highway driving.

According to him the reasons behind the decline in the truck sales are the customers' growing sense of environmental concern, the steeping gas prices, and the uncertain housing market which triggers number of contractors to delay buying new trucks. All these caused the sales drop to 5 percent so far from last year's weak market. Such percentage is more than 50 percent of the overall decline in industry sales which is so far 2 percent down this year.

As a result, car manufacturers began expecting pickup sales to drop since late 1990s up to this year.

According to the Power Information Network, the average discount on a Dodge Ram is $6,000 - a $500 increase since January. On every Silverado pickup, Chevrolet is paying an average of $2,343 in incentives. When the truck was new at the beginning of the year, the brand doubled its discounts.

The same data showed that even Toyota discounted its Tundra during its introduction in February by an average of $2,000.

A data from CNW Marketing Research, which follows industry trends, showed that 6 years ago, 28 percent of consumers all over US who bought pickups did so because of the vehicles' appearance. But this year, only 16 percent of customers purchased big trucks with the primary reason of their looks.

Art Spinella, the president of CNW, said that the buyers who have defected will not go back. They would rather find other stylish vehicles. He added that contractors, farmers or ranchers who need pickups for their businesses will continue to buy them, but not so often like the previous decades.

Brian Johnson, a Lehman Brothers analyst, agrees to this reason that is why he came out with a forecast that the truck market may continue to drop. It would therefore mean more burdens for Detroit car makers who are all trying to regain the 2006 billion-dollar losses.

Ford, which strongly depends on trucks, has 24 percent sales on pickups and 41 percent on the company's gross North American profits during the past five years. This was according to Mr. Johnson's computations in a research report.

Same as Ford, GM, too, heavily relies on pick ups. GM's 32 percent of gross profits is composed of 20 percent pickups sales and others; while Chrysler pickups contributed 25 percent of its profits and 18 percent were pickups vehicle sales during the past five years.

Mr. Johnson said that in 2005, pickups induced almost $10,000 from each vehicle in gross profits for the car companies, while the typical SUV was about $8,000 and each subcompact car had only $400.

Ford's loss of $12.6 billion was attributed to the decline in pickup truck sales in 2006. However, such figure is also attributed to the company's restructuring plan.

Mr. Johnson further said that in the most surmounted case, truck sales could fall by half, amounting to just 7 percent of the American market. And a 7 percent market share is tantamount only to 1.1 million pickups of yearly sales - this figure is almost what Ford sold by itself just a few years ago.

However, despite economic dread, some dealers say their pickup truck business has remained as it is.

Meanwhile, auto makers that were badly affected by such trend on trucks are optimistic that they will soon find a way to regain their losses.

To make pickup trucks marketable again like decades ago, car companies must address the issue on the vehicles' fuel economy and make some more innovations. After all, everybody now is affected by the continuously increasing gas prices while considering vehicle design and styling.