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Jon LeSage

Jon LeSage

Jon LeSage is a California-based journalist covering clean vehicles, alternative energy, and economic and regulatory trends shaping the automotive, transportation, and mobility sectors.

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Forget EVs, Detroit's Big 3 Battle For Heavy-Duty Truck Segment

The Detroit 3 are in a heated battle to take the lead in a highly-profitable segment:  heavy-duty pickups.

The days of striving to take the lead in selling the market’s most fuel-efficient pickup truck, along with high-mileage cars and electrified vehicles, has been set aside by General Motors, Ford, and Fiat Chrysler. Today the race is on for selling heavy-duty pickups capable of serving construction companies, agri-business, and commercial fleets.

Ford leads the segment, and is showing off a refreshed Super Duty F-Series pickup at the Chicago Auto Show. Ford still brags about the truck’s fuel efficiency though a lighter aluminum alloy truck body. The company also hawks the Super Duty being named J.D. Power’s Highest Ranked Large Heavy-Duty Pickup in Initial Quality. Yet the key selling points this year focus on advanced driver-assistance technology and new powertrains that Ford says will make the Super Duty its most powerful offering.

The payback has been lucrative for Ford and its competitors. Ford’s commercial vehicle business, which also includes its Transit and Transit connect vans, earned $10 billion in 2017 profits on $72 billion in revenue for a profit margin of 14 percent. That would make Ford’s commercial vehicle division a Fortune 40 company, bigger than Procter & Gamble.

"These are kind of the unsung heroes of our portfolio," Kumar Galhotra, Ford's president of North America, said at the Chicago Auto Show. "They don't get as many headlines, but they're really strong in terms of growth, in terms of market share, in terms of revenue generation and, most importantly, in terms of profitability." Related: How Long Will This Oil Rally Last?

GM and Fiat Chrysler Automobiles have been striving to catch up this year. GM is adding trims and options to its redesigned Chevrolet Silverado HD and GMC Sierra HD pickups. At last month’s Detroit Auto Show, FCA showed off refreshed versions of its Ram 2500 and 3500 HD trucks that now have 1,000 pound-feet of torque and lush interiors similar to luxury cars.

Pickup trucks have also given the Detroit 3 a lucrative channel for selling diesel-powered vehicles. When diesel cars fell out of favor after Volkswagen’s “Dieselgate” scandal broke, diesel-powered pickups began rising on the sales charts. Ford is taking advantage of it by adding the third-generation 6.7-liter Power Stroke diesel in its pickup offerings.

Diesel engines are needed to increase torque and towing capacity. The diesel-powered 2019 F-450 can tow up to 35,000 lbs., which is up 10,000 lbs. over previous versions of the truck. A new 10-speed transmission, replacing the older six-speed, is giving the commercial trucks more towing power as well, Ford said.

GM is bragging that its redesigned heavy-duty pickups equipped with an optional V8 diesel engine can get 445 horsepower, 910 pound-feet of torque, and can tow up to 35,500 pounds. FAC says that its redesigned Dodge Ram can tow up to 35,100 pounds.

These market dynamics have been in the works for several years now. While passenger cars used to be equal to trucks (including pickups, SUVs, and vans) in U.S. sales, those days are long gone. Last year, trucks made up 11,786,069 units sold versus 5,488,181 cars. Year-over-year, trucks were up 7.2 percent and cars were down 10.5 percent. Related: China Plans To Build Space Solar Station

Low and stable gasoline and diesel prices at retail and fleet fueling stations have helped quite a bit. Those buying heavy-duty pickups, which are typically used for jobs such as hauling concrete, plowing snow, and bringing equipment to construction sites, are very concerned about keeping operating costs in check. Fleet operators will cite reducing and stabilizing fuel prices as a benchmark in their operating costs.

It also reflects market dynamics that have driven shareholders to push Detroit 3 executives to move away from cars and open production plant space for more truck manufacturing.

In late November, GM announced it would be ending production at five plants in the U.S. and Canada to deal with diminishing new vehicle sales and profits — along with American buyers becoming more interested in trucks. That will mean slashing 15 percent of its workforce and killing off the Chevrolet Impala and Volt.

Last year, Ford announced it will stop selling most of its car models in North American in the coming years. The Ford Mustang and Active will be the only ones left, with crossovers, SUVs, and trucks making up the rest of its new vehicle offerings. It was revealed during the company’s quarterly financial release and signaled big changes coming for Ford and the overall market.

Passenger cars and electric vehicles won’t be going away entirely, but some of that will be shifting to China and other markets for U.S. automakers. EVs have the ongoing challenge of being powered by an expensive battery pack. Sales won’t go up to any significant margin until the prices come down.

By Jon LeSage for Oilprice.com

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