Automotive News - May 6, 2019 - Retail - 50

50 * MAY 6, 2019

Peaking again

Pickups are approaching record-share territory with new models on the way.

 Midsize pickup share

 Full-size pickup share

20%
15%
10%
5%
0%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*
*Through April

Source: Automotive News Data Center

PICKUPS

more than 115,000 sales ahead of Ram and
130,000 in front of Chevrolet, according to estimates from the Automotive News Data Center.
"In the quarter and in the face of new competitive entries, F-series customer sales and
average transaction prices held strong from a
year earlier, while share of segment increased," Ford CFO Bob Shanks said during a
first-quarter conference call in April. "And
from here, our plan is to strengthen our position further."

Detroit 3 execs convey
plans to gain share
continued from Page 1

Profits from pickups are essential for the
Detroit 3 to fuel the sizable investments
they're making in new technologies such as
autonomous and electrified vehicles. Fewer
pickups sold in the coming years would hinder their ability to prepare for radical changes
disrupting the industry in the future.
IHS Markit's principal automotive analyst,
Stephanie Brinley, argues the question isn't
whether the industry has reached "peak
truck" but rather "sustainable truck, and is
that level sustainable? And for how long?"
"I think that the cyclical nature of the industry hasn't really changed, and automakers
need to grab onto what's making money," Brinley said. "Profitability always matters, but right
now, you've got a capital-intensive industry
that's trying to fund two different paths."

Record sales ahead?
The simple answer about whether demand
for costly pickups is nearing an end: No.
Despite sharp declines for cars, light-duty
pickup sales have increased 36 percent since
2013 and could reach record levels this year.
That compares with an 11 percent increase
for the overall industry during that time.
All-time highs for pickup sales were set at
the turn of the millennium, when more than
3 million pickups - representing almost 20
percent of U.S. volume - were sold annually
from 1998-2001, according to the Automotive
News Data Center. That compares with an average of 2.75 million in the last four years, including 2.9 million last year, when they were
17 percent of the market.

INVESTMENT
Shift to light trucks
is driving decisions
continued from Page 1

Lexus NX crossover into production in Ontario. The company also has announced a U.S.
manufacturing expansion, committing $749
million in new investments to add about 600
jobs at plants in five states.
 A $1 billion expansion project is underway
at Mercedes-Benz's factory in Vance, Ala., for
electric vehicle production.
 America Honda said last month that it will
suspend the second shift on a line in Marysville, Ohio, to retool it to begin building electrified vehicles.
 Ford Motor Co. said in February that it will
spend $1 billion on its plant in Chicago to
launch three new utilities there.
Indicators of a North American industry
slowdown?
Hardly - despite signs that might suggest
otherwise.
April ended with sales of 1,328,649 cars and
light trucks, a 2.3 percent decline from a year
earlier. In mid-March, credit rating service
Moody's cut its outlook for the auto industry
from stable to negative, citing a worsening environment for consumer credit. And as of April
1, the U.S. industry was sitting on its largest inventory of unsold vehicles in nearly two years.

Chasing higher share

Toyota is expected to redesign its segment-leading Tacoma midsize pickup as early as next year.

Through the first four months of 2019, sales
of light-duty pickups, including midsize and
full-size, were up 1 percent compared with a
year ago to 891,402 trucks.
Expected to drive the growth are roughly a
dozen new or redesigned models from last
year through 2021, more luxury pickups and,
to a lesser extent, fewer car nameplates that
consumers might have bought instead.

New products
Based on the level of capital investment
they're making and the number of new or updated pickups they're bringing to market, automakers appear bullish on the segment for the
foreseeable future. Recent and looming
changes to the segment include redesigns for
each of the Detroit automakers' full-size pickups and the resurrection of the Ford Ranger
and Jeep Gladiator in the midsize segment.
Toyota Motor Corp. also is expected to redesign its Tundra full-size and segment-leading
Tacoma midsize pickups as early as next year,
Automotive News reported in April.

But from the looks of the amount of new investment going into North American plants,
automakers are not alarmed.
Matt DeLorenzo, senior managing editor for
Kelley Blue Book, said manufacturers are looking beyond the current market cycle and making these investments because of the shift to
crossovers, SUVs and pickups from cars.
"In the case of GM, yes, they are expanding
investments in places like Wentzville but also
are closing aging capacity like Oshawa and
Lordstown," DeLorenzo told Automotive News,
referring to plants in Ontario and Ohio. "Jeep's
investment is driven by the success of that
brand in the booming SUV market. There will
also be other plant investments as makers like
Ford and GM gear up their EV efforts as well."

Strong choice
Charlie Chesbrough, senior economist for
Cox Automotive, said with all of the uncertainty around the world, such as the China slowdown and Brexit in Europe, the U.S. remains a
strong choice for business investment.
The U.S. economy, he said, is on solid footing. Even with a potential slowdown in the
near term, the longer-term outlook for the
economy remains strong. The country has
"positive population growth, and massive
economic resources, and thus remains a viable option for manufacturing investments."
"It may seem like a bad time for OEMs to be
making large investments, but the auto industry remains focused on longer-term strategies,"

GM and Fiat Chrysler Automobiles
launched redesigns of their full-size pickups
in 2018 and are bringing their heavy-duty
counterparts to market this year. FCA also is
expected to introduce a midsize pickup for its
Ram brand as early as next year, supplier
sources told Automotive News in September.
A new inline-six diesel engine offering for
GM's full-size pickups is coming this year, and
freshenings for the midsize Chevrolet Colorado and GMC Canyon also are expected soon,
ahead of redesigns in the early 2020s. Ford is
launching freshened Super Duty versions of
its segment-leading F-series franchise of fullsize pickups this year, followed by a redesign
of its F-150 in 2020.
Ford CEO Jim Hackett said in April he
doesn't believe the industry has reached
peak truck, based on Ford's performance. "In
the face of some really good competition,"
Hackett said, "we're doing fairly well."
Despite having the oldest models on the
market, Ford holds a significant lead in U.S.
full-size pickup sales this year through April,

Chesbrough said. "Companies are thinking today about vehicles they will be manufacturing
three to five years from now."
Mazda is capitalizing on this shift with a
manufacturing joint venture in Huntsville,
Ala., with Toyota.
The plant will produce the Toyota Corolla sedan and a yet-unnamed Mazda crossover that
will be new to North America. The plant will
have the capacity to churn out 150,000 crossovers per year. Production is set to begin in
2021.
Masahiro Moro, CEO of Mazda North American Operations, told Automotive News during
the Los Angeles Auto Show in November that
the crossover will be tailored for the U.S., which
he says is notable because Mazda usually develops vehicles based on global demand.
While Moro wouldn't share details on where
the crossover will be positioned in the lineup,
he said he's looking for "mainstream territory
so we can capitalize [on] that capacity as much
as we can."
This crossover will bolster Mazda's utility
portfolio along with the recently introduced
CX-30.

'You have to do it right'
FCA's pending Michigan investments will
double down on the utility-vehicle wave. The
cash will support production of a variety of
nameplates such as the three-row Wagoneer/
Grand Wagoneer, the Grand Cherokee and the
unnamed three-row Jeep.

Executives at each of the Detroit 3 conveyed plans to gain market share among fullsize pickups, but that will be easier said than
done.
FCA CEO Mike Manley said last week that
Ram has an "eye on" keeping its No. 2 position in the U.S. after leapfrogging Chevrolet to
begin 2019.
Ram was able to do so by simultaneously
producing the redesigned Ram 1500 and the
previous-generation Classic version.
Manley said that strategy is working and he
sees "no reason in the foreseeable future" to
end production of the older model.
GM has been the most conservative in its
share-growth proclamations. CFO Dhivya
Suryadevara said this year that the automaker would not introduce new models if the
company didn't think it could maintain or increase share, but she and other GM executives, including CEO Mary Barra, have said
GM will not sacrifice profits for higher market
share.
"Profitability does need to be the primary
concern," said Brinley, the IHS Markit analyst. "That has to override share. We've seen
time and time again, if you start chasing
share, ultimately, you lose ground. It's just
not a model that really works." a

These three-row Jeeps will be a welcome sight
for dealers who have wanted more options.
While the boxy Commander offered an extra row,
some say it was too cramped to be of much use.
Patrick Foster, an automotive historian who
has written several books chronicling Jeep's
history, thinks FCA has learned a lesson from
the Commander. It was discontinued after the
2010 model year because of poor sales and
called "unfit for human consumption" by
FCA's CEO at the time, the late Sergio Marchionne. Foster said the vehicle "looked like a
tank" yet didn't have any room.
"They tried to squeeze this third [row] in the
back," Foster recalled. "I was there at the
launch at the [2005] New York auto show. Even
then, people were coming up and saying it
doesn't look like that third seat helps anybody.
I think they tried to do it on the cheap. You
have to do it right or not at all."
Jeremy Acevedo, manager of industry analysis
for Edmunds, said the unnamed three-row Jeep
likely will take aim at the Ford Explorer, Honda
Pilot and Toyota Highlander. It's slated to roll off
the line at the Detroit plant by the end of 2020.
"Now with Jeep entering that segment, Jeep
is a force to be reckoned with," Acevedo said.
"The fact that they're going to be expanding
their size and expanding their appeal to a
bunch of shoppers who kept the Grand Cherokee off their list because it didn't serve their
needs. Opening that whole sector is huge for
them and bad news for everybody else in that
space." a

Automotive News - May 6, 2019 - Retail

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