The 2019 Auto Show in Chicago is the latest indication of where the industry is headed, and it is certainly pivoted toward growth in the truck segment. The growth of trucks, especially heavy- duty model types, or HD as the industry abbreviation denotes; represents a significant margin opportunity for auto makers.
This all comes within the backdrop of Ford announcing recalls for safety on over 1.5 million F-150 trucks from model years 2011 – 2013. This is a reminder that production realities still exist, and that no amount of money ensures that any particular vehicle will be fully free from defects or issues.
The truck market has evolved to where not just contractors, farmers, or other heavy labor job types utilize them. The HD truck market has become more mainstream over the past few years and is a trend that is expected to continue. The style of truck that was once exclusively for work has attracted casual drivers because of the towing power.
The ability to pull heavy loads is the key driver for HD truck models, according to industry experts, towing ability is the top priority for the consumer. The secondary priority is for the truck to have high tech options for entertainment and for driver and passenger comfort. Those types of examples would be a radio capable of attaching devices or heated seats.
The truck market has numerous options from small cabs, medium truck beds, and extended cabs. The heavy-duty class of trucks provide the best profit margin opportunity for automakers, especially American manufacturers. The market is dominated by Ford, Chevrolet is in a distant second, and Ram (parent company Daimler Benz) is in third.
The selling price on the new Ford HD is approaching six-figures it is hovering around $90,000 for the 2020 models. The demand is there and that is how the heavy-duty truck segment of the industry is going to move units and solve for other profit and revenue shortfalls within domestic automakers business models.
The Ram lineup of trucks is slightly less costly with their base HD Ram model at about $68,000 and the upgrades to the enhanced tech and other features packaged out at about $77,000 including the destination fees. The tech in the trucks provide amenities that passenger vehicles have currently: surround-view cameras, rear view cameras, lane warning systems, and bed-lowering systems.
It should be noted that Ram also issued a recall on their trucks on Wednesday as well for a problem potentially with the steering linkage system. The Ram series has the ability of getting a consumer into a HD model at a more modest price point than Ford, but Ford would counter with the amount of amenities and towing power that their packages provide to the consumer.
Chevrolet offers the Silverado HD with packages starting at $37,000 and with enhanced packages that drive the price up to around $70,000 per unit. The Chevy brand story is reliability, long-lasting truck performance, and the flexibility of financing the payments through GM Financial.
The Chevy also offers two V8 engine options and towing and hill assist features. They also have an “Infotainment” center option to bring entertainment to the driver and passengers for long hauls.
The Chicago Auto Show featured these Heavy-Duty trucks and Adventure SUVs and those are the two biggest trends in the auto industry. The American automakers desperately need something to differentiate themselves from their European and Asian competitors. These two categories have the added bonus of profitability.
The trend to watch will be what is already occurring at GM/Chevrolet where they are discontinuing making several passenger cars in favor of making more trucks. The executives at Ford are also weighing the streamlined approach to their regular automobile line to focus more on production of trucks, especially HD truck models.
The demand for HD trucks continues even as the price tag goes up, which for the automaker is a good situation for their profitability. The impact on the environment for these gas guzzlers and the impact of having people that are not regular truck users driving larger trucks for everyday use remains to be seen.