Pickups Follow An Expanding Economy

April 24, 2015

Plunging fuel prices have put smiles on people’s faces and cash in their pockets. They’re spending a lot of it on all kinds of consumer goods, from restaurant meals to new cars. As the general news media have repeatedly reported, pickup trucks and large sport utility vehicles have become hot commodities as folks forget that gasoline cost $4 and more per gallon not that long ago, and will again, sooner or later, as the current glut of oil in world markets is drained.

Meanwhile, consumer spending in other areas, such as new houses, is spurring economic activity. Construction contractors are finding themselves with more jobs and—with lowered fuel costs—more money at the end of their work days, and they have resumed buying equipment to replace old iron they hung onto through the Great Recession. That includes pickups, which, to commercial users, are not just nice to have, but real tools for their trades.

“Construction is the No. 1 vocation we have in the broad sense, from home builders to dam builders,” says Dan Tigges, product manager for General Motors’ full-size trucks, the Chevrolet Silverado and GMC Sierra. GM’s Fleet and Commercial division accounts for about 50 percent of heavy-duty pickup sales, and 25 to 30 percent in the light-duty 1500 series. He has noticed that the half-tonners have become attractive to some buyers because “one costs $4,000 less, and fuel economy with the 5.3-liter (gasoline V-8) is significantly better than the 6-liter in the three-quarter ton.”

“There’s increased business in general due to fuel prices,” says Doug Scott, marketing manager at Ford Truck Group. “A lot of customers can justify replacing equipment.” The average age of commercial trucks, which also includes some midrange models, is 10 to 11 years, and that means there’s still pent-up demand. In the past year, a lot of that has been met, so that factor is not as great now.

Indeed, the oil-centric results have been mixed. The down side of low petroleum prices is cutbacks in oil drilling in the United States, activity that had been driving commercial sales. “We actually saw a drop in pickup sales when oil prices went down,” says Dave Sowers, head of Ram Truck commercial marketing. “If they postpone drilling, they don’t buy a new truck.”

Low fuel prices have affected what customers buy, too. Scott says some fleet buyers of Ford’s SuperDuty models have gravitated toward gasoline engines because of their lower cost of acquisition compared to diesel, and figure higher fuel use is all right because it’s more affordable. The split currently is 55 percent gasoline and 45 percent diesel in fleet and commercial sales. About 70 percent of retail customers who buy SuperDuties to tow heavy horse, boat and RV trailers tend to go with a diesel.

Increasingly stringent federal limits on exhaust emissions have resulted in extensive development and production costs for diesels, which also make them more costly to buy. For example, the upcharge for GM’s Duramax diesel is now about $11,000 over gasoline. “Diesel fuel’s been up in price compared to gasoline, and prices make gasoline very attractive,” says Tigges. “But long-term…?”

Fuel prices definitely affected the diesel-to-gasoline split at Ram, Sowers says. Soon after its introduction about a year and a half ago, the 6.4-liter Hemi gasoline V-8 began taking orders away from the pricier Cummins Turbo Diesel in Ram HD pickups. But it’s also a matter of duty cycle: “If cycles are short, gasoline works well—for example, if a truck goes to a work site, then is sitting all day. And a gasoline engine weighs less, which means more payload. If miles are higher, then diesel can work well.”

It’s a somewhat different story in half-ton pickups, where Ram has an exclusive with its V-6 EcoDiesel. It has become popular in Ram 1500s, Sowers says. Production at the VM Motori plant in Italy has had to be boosted at least twice to try to keep up with demand, and “we haven’t found the top of the market. Days on the lot—that’s the time it takes before a dealer sells a truck—for the EcoDiesel is one-half the days for gasoline.” Helping are its modest list price, about $3,000 more than the 5.7-liter Hemi gasoline V-8, and a fuel economy rating of 21 City and 29 mpg Highway for a High Fuel Efficiency model.

Aluminum F-150

Ford’s half-ton F-150 has been the best-selling single vehicle model—car or truck—in the U.S. for decades. So Ford took a big gamble when it switched from steel body panels to aluminum. The lighter material, also used for parts of the frame, saves about 450 to 700 pounds per truck, depending on cab style and bed length. That means more payload and allows use of smaller yet more powerful engines, which preserves performance and raises fuel economy. Turbocharged EcoBoost 3.5- and 2.7-liter gasoline V-6s are the featured engines, while a 5-liter naturally aspirated V-8 is the only eight-cylinder engine available.

Historically, aluminum has been more expensive than steel, but as a commodity it has come down in cost in recent years. And huge anticipated volume has enabled Ford to obtain some decent deals from suppliers, executives have hinted. The gamble’s evidently paid off, because sales have outstripped demand. Production began in the Dearborn, Mich., plant last year, but it wasn’t enough and more capacity has been added at the Kansas City, Mo., factory.

Top executives have told investors that they plan to use aluminum in heavier pickups, too, so what’s happening with the F-150 is highly relevant to the company and its dealers and customers—and to competitors, who are watching closely. And the F-150 is more than a consumer product: Currently, seven out of 10 go to consumers, but 10 percent of sales are to fleets for commercial duties and another 20 percent go to tradesmen for dual personal-and-work use, says Scott.

Observers have wondered how body shops accustomed to working with steel will handle repairs from collision damage to aluminum F-150s, but Ford had researched this angle as part of planning for the switch-over. Eighty percent of F-150 owners are within 30 minutes of a shop that can do aluminum repairs, and 90 percent are within two hours, executives said at the truck’s unveiling last year. And if money is to be made, many more body shop proprietors will train their workers in aluminum.

Recently, Scott had more information: “According to data we see, every year, 6 percent of F-150s get in collisions but only 1.2 percent of those accidents involved structural repairs. The rest are cosmetic.” And he cited a news report that said insurance premiums for aluminum F-150s are only slightly higher than for steel-bodied pickups.

Meanwhile, Toyota’s full-size Tundra pickup has not sold nearly as well as the otherwise highly successful builder’s automobiles. Although Tundras are occasionally seen on work sites (and its compact Tacoma pickups are very popular in California), about 95 percent of sales are to consumers, a spokesman said last year, and that remains the case. So Toyota has backed away from the commercial market. However, Nissan, whose Frontier small pickups are also popular in the West, has expanded its commercial-truck offerings, primarily with cargo and passenger vans but soon with redesigned Titan pickup trucks.

The next diesels

The next light-truck diesels will not go into Ford’s best-selling F-150 or GM’s popular Silverado and Sierra half-ton pickups, but into the upcoming Nissan Titan XD. Nissan surprised some observers in 2013 when it announced an agreement with Cummins for the ISV5.0, a 5-liter V-8 designed as a commercial engine using advanced designs and the latest materials. That fall, Cummins showed it at a press event in Columbus, Ind., where it will be built. Copies were installed in buses and medium-duty trucks, which reporters drove. And as a teaser, several Cummins-powered Titans briefly paraded by. 

Cummins included a bright-yellow prototype XD in its booth at the recent Mid-America Trucking Show in Louisville. There, curious attendees gathered around and peered into the engine compartment at the diesel. Titan, which entered the market in 2005 but languished in sales with few updates since then, has been a consumer product. But Nissan’s commercial arm is considering making the redesigned Titan XD, due out later this year as a 2016 model, part of its program.

At the time of the Nissan-Cummins announcement, truck fans wondered why Chrysler, the long-time user (since model-year 1989) of the lauded Cummins Turbodiesel I-6 (sold in medium-duty trucks as the ISB) in its Dodge pickups, didn’t agree to use the new Cummins V-8 in its Ram 1500. Ram representatives said they considered it but found it too expensive to buy and less economical on fuel than they wanted. Perhaps more important, Chrysler had become part of Fiat of Italy, which had a long-running supply arrangement with VM Motori, builder of the 3-liter V-6 (now known as the EcoDiesel). Aside from corporate dictates, the lighter-weight, less costly Italian engine with its proven fuel economy (in Europe and now here) was arguably the better choice for the half-ton Ram.

General Motors, meanwhile, is preparing to add an Inline-4 diesel to the upcoming Chevy Colorado and GMC Canyon, says Mike Jones, a manager in the mid-size pickups program. To be called the Duramax 2.8 (for its displacement in liters) and built in Thailand, the diesel’s output is estimated to be 181 horsepower and 369 lb.-ft. When the Colorado and Canyon pickups and cab-chassis models enter production later this year, they will have gasoline engines: a 2.4-liter I-4 and 3.6-liter V-6. The diesel will arrive later.

Those trucks are three-quarters the size of full-size pickups, and will be lighter, more agile and more fuel efficient. With a 2,200-pound payload capacity, they’ll still be able to handle some serious work. A box-delete option, whereby pickups are built and shipped as cab-chassis vehicles without pickup beds (and with $300 taken off the sticker), was announced earlier. Also available is a back-seat delete (a $260 credit), leaving the rear area of extended-cab models clear for storage of tools and supplies and even installation of small cabinets. Jones says construction is one of the trucks’ intended applications, as are public utilities and municipal and state fleets, auto parts delivery, and pest control.