Keep on Truckin'

Despite their label as gas-guzzlers, cash cows and environmentally unfriendly vehicles, the buying public just can't seem to get enough of fullsize SUVs and pickup trucks.

Forget the car-like cross/utility vehicles — the final step in pushing light trucks permanently into the majority of new vehicle sales three years ago — it's still the fullsize bad boys that bring home the bacon.

One-in-five light vehicles bought in the U.S. today is a fullsize SUV or pickup. Ward's segments them as large SUVs, large-luxury SUVs and large pickups.

Yet, surprisingly, of the 16 mainstream OEMs selling new vehicles in the U.S., only five — through 11 brands — are competing in this segment, including Nissan North America Inc.'s Titan pickup and Armada SUV.

A sampling of the segment includes the perennial bestselling Ford F-Series and the Dodge Ram pickups, plus the Cadillac Escalade, Toyota Sequoia and Hummer SUVs and legendary Chevrolet Suburban.

Light-vehicle market share of these big trucks has more than doubled from 9.3% in 1991 to 20.3% in 2003. And for the first two months of 2004, sales were up a whopping 15.9% from year-ago.

Despite all the hand wringing over rising fuel costs, fears of too much dependence on foreign oil and flack from clean-air enthusiasts, the Big Three are selling even more big trucks, while two relatively new competitors to the segment, Toyota Motor Sales U.S.A. Inc. and Nissan, are making serious inroads into the fray.

Most of the big-ticket SUVs have base prices ranging from about $35,000 to more than $70,000, while the large pickups often have transaction prices of more than $30,000.

Unfortunately for General Motors Corp., Ford Motor Co. and the Chrysler Group, robust sales of these vehicles have not put the companies back on the road to financial bliss in North America. In part, that's because flagging sales of their other vehicles are dragging down net income. Also, more competition and a general overall industry reliance on market incentives have led to some discounting on fullsize light trucks.

In February alone, Edmunds.com estimates incentives on large trucks increased $315 on average, or 16.5% from year-ago. Excluding new vehicles and the few with redesigns in 2003, the increase is much higher. In many cases, fullsize light-truck sales are cannibalizing sales of other vehicles inside the companies.

“Pricing has become more aggressive on large pickups,” says Lincoln Merrihew, managing director of Compete Automotive, which tracks auto shopping patterns on the Internet. “Consumers are moving up from smaller to larger pickups.”

The same is true for SUVs, which are part of a burgeoning luxury market. Although a small-volume niche, sales of large-luxury SUVs — with a base price more than $45,000 and a transaction price often above $50,000 — increased 40% in 2003 over 2002, to 150,438 units. That's nearly double the segment's volume in 2001.

It all boils down to one hard fact: Despite all the talk about air pollution and squandered fuel, consumers want big trucks.

More than 3 million big SUVs and pickups have been sold annually in the U.S. over the last four years, including a record 3.4 million in 2003 that is certain to be topped this year. Even with lower profit margins, it's easy to see why the industry continues to embrace them.