Big pickup transaction prices rise at twice the industry rate

Big pickup transaction prices rise at twice the industry rate
Nick Bunkley
Automotive News | June 10, 2013 – 12:01 am EST

It feels like the good old days for the Detroit 3, with big pickups flying off dealership lots and plants running full out to fill orders for large, profitable models.

“It’s a great time to be in the truck business,” said Kurt McNeil, vice president of U.S. sales operations at General Motors, which starts shipping redesigned versions of its full-sized pickups to dealers this month.

In many ways, this may be an even better time than before the recession.

Although volumes remain well below the previous peaks, average transaction prices for full-sized pickups have increased at more than double the average rate for the industry since 2005, according to And manufacturers are not creating demand artificially with unsustainable discounts.

Edmunds says average transaction prices for large pickups, including heavy-duty models, have risen to almost $40,000, from about $31,000 in 2005. That equates to an 8 percent gain after adjusting for inflation.

And the housing market is just starting to give the auto industry a tailwind that some in the industry say could bring pickup sales back to the levels Detroit enjoyed nearly a decade ago.

Also, the Detroit 3 no longer have to spend their truck profits just trying to cover the crushing legacy costs and overhead expenses that helped land two of them in Bankruptcy Court.

“It allows them to do things and make investments that in the past they neglected,” Brian Johnson, an analyst with Barclays Capital, said in an interview.

In May, full-sized pickups accounted for about one-third of the 8 percent increase in U.S. sales volume from a year ago. For the first five months of the year, the segment was up 21 percent while the industry rose only 7 percent.

High prices
Average transaction prices for large pickups have been rising at more than double the average rate for the industry.
Large pickups avg. Industry avg.
2005 $31,059 $27,655
2006 $31,422 $27,661
2007 $32,643 $28,208
2008 $32,660 $28,050
2009 $34,879 $28,710
2010 $36,396 $29,830
2011 $38,047 $30,583
2012 $39,108 $30,803
2013 $39,915 $31,215
Change since 2005 29% 13%

2 million pickups

At that rate — and most analysts expect the industry’s selling rate to rise in the second half — deliveries of full-sized pickups would reach 2 million units for the first time since 2007, before surging gasoline prices pushed many pickup buyers to seek more efficient alternatives.

“What we’re really encouraged about is that the 2010-12 improvement came without the benefit of housing. That was a missing piece of the puzzle,” Doug Scott, marketing manager for Ford Motor Co.’s truck group, said in an interview. “Now it looks like that housing element is going to be there.

“That could really drive full-sized pickup sales higher in the future and perhaps put us in a position where we approach those 2004-05 levels. It wasn’t that long ago that most people thought that wasn’t in the cards.”

In May, Ford sold 71,604 F-series models, 31 percent more than a year ago and the most in any month since August 2006. Sales rose 24 percent for GM’s full-sized pickups — the Chevrolet Silverado and GMC Sierra — and 22 percent for Chrysler Group’s Ram. Those four nameplates accounted for one of every eight vehicles sold last month.

Ford, which sold more than 900,000 F-series models in both 2004 and 2005, is on track to sell nearly 800,000 this year. But because the average transaction price for the F series is up more than $10,000 since 2005, this year’s sales of that one nameplate would generate almost $5 billion more than back then, or about the same amount after adjusting for inflation.

As much as the Detroit 3 have focused on improving their car lineups in recent years, nothing is better for their bottom lines than growth in pickups. The F series accounted for 90 percent of Ford’s profits, while the Silverado and Sierra generated two-thirds of GM’s earnings in 2012, Morgan Stanley analyst Adam Jonas has said.

Analysts say pickups will continue to outpace overall industry growth as the market climbs to at least 16 million units next year, driven by demand from home building, the energy boom and even a modest resurgence in so-called urban cowboys — people who don’t need a truck for work but still buy one, oftentimes splurging for plush, high-priced versions.

“The truck segment really shows no sign of slowing down,” said Alec Gutierrez, senior market analyst for Kelley Blue Book. “A lot of those consumers who sat on the sidelines are now jumping back into the market, even though they don’t have a job in construction and they’re not hauling anything.”

Pickup transaction prices have risen in large part because of increasing sales of high-end trims, including the F-150 King Ranch, the Ram Laramie and the upcoming Silverado High Country. A 4×4 2013 F-150 Limited has a starting price of more than $54,000.

Ford’s Scott said 30 percent of F-150 retail sales and more than half of F-series heavy-duty pickups are so-called high-series versions.

“Our high-series mix has never been better than it’s been these last couple of years,” Scott said. “If you go down in Texas, it’s not uncommon to see a King Ranch on a construction site. It’s their office. They’re working out of it. They want the refinement, but they need the capability as well.”

Luxury cars, SUVs also up

Full-sized pickups were not the only lucrative models to fare extremely well last month.

Sales of compact luxury cars rose 24 percent, and premium luxury cars were up 40 percent. Cadillac, which has one new model in each of those two segments, posted a 40 percent gain, its biggest year-over-year increase since 1976. Porsche sales were up 38 percent.

Large SUVs increased 23 percent, with SUVs posting an average gain of 15 percent overall. Crossovers were up 10 percent, including a 24 percent increase for compact crossovers.

The industry’s seasonally adjusted annualized selling rate jumped to 15.3 million, from 14.9 million in April and 13.9 million a year ago.

The only major automaker to report a sales decline for the first five months was Hyundai-Kia Automotive, which doesn’t sell any big pickups.


Entire contents © 2013 Crain Communications, Inc.

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