Photo courtesy of Ford.
“Quite simply, it’s a great time to be in the truck business,” said Kurt McNeil, head of General Motors Company (NYSE:GM) sales operations in the United States. He’s right, that simple sentence pretty much nails it. Full-size pickup trucks is the most profitable vehicle segment in the U.S. market and has historically been dominated by Detroit’s Big Three automakers, General Motors Company (NYSE:GM), Ford Motor Company (NYSE:F), and Chrysler. I’ll explain why these sales are here to stay and why there’s such an advantage for Detroit over its Japanese competitors.
Good old days
As you can see in the chart below, which details America’s three top-selling trucks, sales are still far below peak selling numbers prior to the recession.
The full-size truck segment looks to continue the trend of increased sales, and comparing year-to-date sales to last year’s, the F-Series, Silverado, and Ram have surged 21.7%, 23.9% and 22.7%, respectively. That’s good news for Detroit’s Big Three because the segment brings in a majority of their profits – but it gets better.
Not only does the full-size truck segment bring in a majority of profits, the margins are looking even juicier this year as transaction prices continue to rise and cash incentives remain lower. In fact, looking at the graph below you can see how much more transaction prices for trucks rose compared to the rest of the industry.
Data from Edmunds.com
Moreover, seemingly steadily increasing sales have allowed automakers to better optimize for production – further boosting profits.
“Full size truck sales continue to gain momentum in May and we expect the segment to post a 22 percent increase compared to the nearly nine percent industry increase,” said Jesse Toprak, senior analyst for TrueCar.com. “Stability in the industry is now the norm, which is a positive for automakers as it results in the ability to optimize production levels, therefore improving profitability.”
Japanese manufacturers have had a stranglehold of their own on other vehicle segments, like the midsize sedan vehicles. But when it comes to the enormous profits generated in North America, Ford Motor Company (NYSE:F), General Motors Company (NYSE:GM), and Chrysler completely dominate, combining for nearly 92% of the full-size truck segment.
If you break the numbers from 2012 down, Ford Motor Company (NYSE:F)’s F-Series was the market leader with 38.5% market share. General Motors Company (NYSE:GM) trailed slightly with a 35.8% share, combined from its Silverado and Sierra trucks that individually had 26.4% and 9.4% shares. Chrysler’s Ram came in third with 17.5%.