Solid demand
All the big three Detroit automakers are performing incredibly well in the pickup segment. Ford continues to lead the pack. The company has just released its April sales number which shows that it sold over 59,000 pick-up trucks in the month. This is 24% higher than the year-ago levels and comes after a solid March sales.
The current demand it is widespread and coming from all parts of the country with the strongest areas being southeast and the west. Some of the dealers are reporting over 50% increases in F-series truck sales.
The market will continue to gain traction
New housing constructions are regarded as the key driver for the truck market. And the new housing starts have increased by 35.6% during the first quarter as per Ford Motor Company (NYSE:F)’s estimates. According to a Bloomberg survey, the annualized rate of housing starts has increased from 917,000 in February to about 930,000 in March.
No wonder the pickup segment has outpaced the broader automobile industry growth by almost three times and moved up 20% over year-ago levels. This segment accounted for around 11.5% of the total industry sales in April.
The strong housing trends are expected to continue in the near term helped by low mortgage rates and overall recovery in the economy. Bloomberg estimates that applications for home building have hit an annualized rate of 943,000 in March, ahead of the actual housing starts. This will keep the momentum going in the pickup trucks segment.
Competition will be tough
Due to the solid demand automakers are vying for gaining share in the lucrative pickup truck market. This segment is a favorite with automakers due to the fat margins, which excluding development costs can even go up to ten times the margins on a sedan or a small car.
Currently, GM is witnessing solid demand for its trucks. This is further helped by the heavy incentives that the company is offering. In April, Silverado sales were higher by 28% to 39,395 while Sierra moved up 12.8% to 14,208.
GM’s new 2014 Silverado and Sierra will make their appearances later this year. The company is building up the excitement by promoting the superior fuel efficiency of these trucks. The new Silverado will use V8 fuel economy which is superior to Ford Motor Company (NYSE:F)’s EcoBoost V6. Additionally, GM will offer carry over pricing for the new Silverado, free scheduled maintenance for two years, and other benefits. Management expects new models to account for roughly 25% of total truck sales this year.
After a slow launch in the first quarter, demand for the new 2013 Chrysler RAM is surging. Chrysler is 58.5% owned by Italian automaker Fiat.
