SAN ANTONIO – Oil prices may not be at the lofty levels of the past, but they are stable. Meanwhile, a new administration in Washington is promising millions in infrastructure investment.
Pickup sales here in truck-loving Texas, while also not at the lofty levels of the past, are healthy, and dealers see even better times are ahead if the promised investment occurs.
“Even with the downturn in oil and gas, (2016) was still a pretty good year,” Alvin Bailey, fleet specialist for Kahlig Auto Group in San Antonio, tells WardsAuto.
Bailey says he personally delivered 387 units in 2016, down about 150 units from the previous year. By comparison, in 2008 he delivered only 145.
The Kahlig Auto Group includes Lexus, Toyota, Mazda, Lincoln, Volkswagen, and Subaru franchises in San Antonio. It also owns Chrysler Dodge Ram, Ford and Jeep dealerships in nearby New Braunfels.
The group’s location means it serves both the Eagle Ford shale oil- and natural-gas production area in South Texas and the Permian Basin oil field in West Texas.
Bailey’s specialty is heavy-duty trucks such as the Ford F-250 and larger, as well as 2-ton flatbed trucks for pulling trailers.
With oil prices stabilized at a lower level, one change he has seen from four years ago is less-lavish spending on trucks by energy companies. For example, he says, there now is “much less of an appetite” for sales of Ford F-Series pickups with the super-luxury King Ranch trim. Instead, oil-field workers are more likely to receive an F-Series pickup in the basic XL trim level.
The energy industry accounts for about 35% of his sales, Bailey says, but 60% of his business comes from the construction sector. He says he sells every F-250 through F-550 Super Duty truck he can get his hands on.
Non-commercial sales represent the remainder of his volume, and that business “has vanished,” Bailey says.
Registrations of non-luxury fullsize pickups in Texas for the first 11 months of 2016 declined 5.1% compared with a year earlier, according to research firm IHS Markit. But that trend should turn upward in 2017, according to Omar Garcia, president and CEO of the South Texas Energy and Economic Roundtable, an oil and gas trade association based in San Antonio.
Garcia sees excitement among group members who believe they are ready to help meet rising global demand for oil and gas.
For example, he says, Cheniere Energy is constructing a liquid-natural-gas plant at Corpus Christi, and natural gas produced in the Eagle Ford shale fields will be piped there, which should sustain drilling in the area for years.
“You are going to see (oil and gas producers) reinvest in themselves,” which means more truck sales, Garcia says.
Times also are good for Red McCombs Ford in San Antonio, whose 2016 truck sales were up 116% from prior-year. But, says general manager Shawn Barry, “There is a lot more to this story than just oil.”
Unlike Bailey’s dealerships, Barry’s fleet sales to oil companies are flat and the growth is in retail sales. He has loaded up on King Ranch, Lariat and other high-margin luxury pickup models.
“It is Texas, and people are buying more trucks than they ever have,” he says. “Customers haven’t come in all year and asked what the fuel economy is on a truck or SUV,” says Barry. “Back in 2007, that was the first question they asked.”
The new administration in Washington has Texans anticipating good times. President Trump has said he wants to boost domestic energy production and invest millions in infrastructure. Kahlig’s Bailey expects the new administration to find new trading partners around the world for light sweet crude oil and natural gas. “If it does, we will see another explosion in the Eagle Ford shale area,” he says.
And that would mean more pickup sales.
