Year of the Pickup: Not Realized Yet

Anthony Fontanelle
June 13, 2007

The brawny Chevy Silverado and the impressive Toyota Tundra can tow ten axle-busting tons between them. That is to show how powerful the pickups that the industry has. Unfortunately, mainstream bruisers are hurting the sales of pickups. This is why critics are wondering whether, 2007 which is said to be the Year of the Pickup, is really realized.

This year is supposed to be pushing the edge of the pickups. As a fact, it is expected that sales of revamped models like the Silverado, Tundra, GMC Sierra and the Ford Super Duty will be pushed to new heights. The GMC pickup fifth wheel hitch could be found wanting. But the sales demise could be brought by other compelling factors.

The Toyota Motor Corp. said that it wanted to sell 200,000 Tundras this year. Four months into the year, though, full-size pickup sales declined by about five percent from the same period a year ago and that is a fall analysts did not expect and one that privately frustrates automakers. Analysts added although a five percent dive might not seem dramatic, truck sales last year were mediocre, held down by aging vehicles and rising gas prices. With four new models in the seven-truck segment, the drop this year is especially disappointing, they noted.

The Japanese automaker intends to sell 200,000 Tundras this year, or about 16,600 trucks a month. While Tundra sales are rising, they had not hit 16,600 through April, analysts divulged. As powerful as the new trucks are, they are fighting fierce economic headwinds that include a slumping housing market, higher mortgage payments and rising gas prices, analysts added.

"Housing starts aren't what they should be, so people in the business aren't buying," said Jack Nerad, the executive market analyst at Kelley Blue Book. "I think $3-a-gallon gas is a factor. But a lot of it is just the perception that this might not be a great time to buy a big, fuel-thirsty vehicle."

Though the Tundra, Silverado and the Sierra began arriving at dealerships, they have incentives on them and are likely to get more. "We came to market with what we know is a very, very competitive product that stands up to anything in the segment, and I think our sales volumes are very good for this point in the launch," said Brian Smith, Toyota's corporate manager of truck operations.

In April, the average incentive on a pickup was $3,333 and that amount is only slightly lower than $3,570 a year earlier, said Jesse Topak, the executive director of industry analysis at Edmunds.com. "They will keep adjusting prices until they get the volume where they want it," he added.

But incentives are likely to hurt significant pickup profits this year. "There won't be as much profit as they used to get, and Toyota will probably be the biggest loser," said Todd Turner, the president of Car Concepts of Thousand Oaks. "They had a lot of research and development cost with the Tundra. Now, with incentives, they could be getting less return on that volume."

For years, pickups have been the hot selling vehicles in the United States with the Ford F-series pickup on the lead, followed by the Chevy Silverado and the Dodge Ram, respectively. However, the segment's unsatisfactory performance did not surprise one veteran analyst. "I said last year that were it not for the new product, the underlying economics want the segment to go down. That may happen anyway,” said George Pipas, the sales analysis manager at Ford.

He added, "I think sales in this (pickup) category may not match last year's sales, which were down ten percent," he said. "The only way sales are going to match last year's is if incentives go up."

Source:  Amazines.com