How Business Could “Pick Up” From the Light Truck Market

Hurricane Harvey devastated Houston and much of coastal Texas, but in addition to the flooding it caused it also washed away thousands of potential sales in pickups built by the three major U.S. automakers, reported industry research firm IHSMarkit. The firm’s report suggested automakers may have lost 10,000 to 25,000 sales during the last week of August — in part as Houston has remained the 10th largest auto market in the United States, but is actually ranked third for pickup truck sales.

Sales of full size trucks topped 37,000 in the Houston market through July of this year, and only Dallas/Fort Worth and Tulsa ranked higher for that market segment.

Truck manufacturers could see a “pick-up” in sales even as the auto industry has seemed to hit the brakes.

Total U.S. light vehicle sales slipped by 1.8 percent in August and were at the lowest level since February 2014. However, the industry could see an uptick in sales for the rest of 2017 as the flood waters recede and the job of rebuilding Texas and Florida, which was also hit by its own devastating hurricane, begins in earnest. More importantly, even with the storm, General Motors and Toyota each reported strong U.S. sales gains in August even as their biggest rivals saw declines.

In addition, another automaker announced just before the storm that it was set to enter the U.S. light truck market for the first time. Hyundai USA made it official in August that it would introduce a pickup truck based on its well-received Santa Cruz concept from 2015, and what sets this new truck apart is that it isn’t directly targeting the same buyers who have remained loyal to Detroit’s “Big Three.”

“Truck buyers are very loyal, and as long as gas prices are low, it absolutely makes sense for Hyundai to be in the market,” said Jason Green, CEO of The Cambridge Group, a Chicago-based management consulting services company. “The American brands are hard to beat, and you can’t capture the market from Chevy, Ford or Ram; so one option is for Hyundai to go after the weaker sisters including Honda, Nissan and Toyota.”

The other option is to aim at a different buyer.

“The Santa Cruz is a midsize option that could have the style to attract younger consumers and first time truck buyers,” Green told NOLN. “Its edgier design could capture that market.”

Many older consumers, too, are taking another look at trucks, which aren’t just for the workman anymore.

“With a truck or SUV, you are higher up and more comfortable,” Green added. “From a safety perspective, there is a psychology that you are safer in an SUV or truck in an accident, but comfort is the other part. Once you’ve driven a truck or an SUV, it is hard to go back to a sedan, especially for older consumers. And today’s trucks and SUVs are more luxurious.”

In some parts of the country, the pickup has been the king of road. In metro Detroit, this is certainly true.

“We’ve always seen a lot of pickup trucks come into our location,” said Joe Ali, owner and operator of Auto Lab’s franchise in Canton, Michigan, just outside of Detroit. “I’m not sure if we’ve seen an increase as we did in the past couple of years, but the truck business has been steady.”

Ali told NOLN that Hyundai’s entry into the market could only result in even more business. “Yes, I think we’ll see more pickups, but this is Michigan, and we see a lot of them.”

Smaller Trucks

While large pickups have remained popular, going smaller could help attract those new buyers. Hyundai could have an advantage as it enters the market, but there could still be competition.

“OEMs are also targeting smaller footprint pickups to offer lifestyle propositions within their portfolio of vehicles, similar to the twins, Colorado and Canyon,” explained Vishwas Shankar, mobility research manager for research firm Frost & Sullivan Mobility. “Pickups have remained at strong profitability levels for OEMs.”

But because pickups require dedicated platforms that often involve unibody construction, supply may not keep up with demand, Shankar added.

“Pickups would become even more integral to OEMs top and bottom line when they share a platform with lower — cars, SUVs, vans — or even higher segment vehicles, such as city trucks and city vans,” Shankar said. “In the U.S., this segment will be key to meeting CAFE standards, and it will also act as a technology carrier in certain ways. For example, the Ford F-150 was the first adopter of broad aluminum application strategy within Ford.”

Service Needs

For the auto service industry, the pick-up in sales of pickups could be good for business, as these vehicles tend to require more frequent servicing. While many sedans and compact cars may require oil changes every 5,000 miles, or possibly a yearly servicing, trucks may require the oil be changed every 3,000 miles or every three months.

“There is an irony here — these vehicles are sold as being rugged and providing freedom to go anywhere,” Green said. “But you are more tethered to the servicing than you would be with a sedan.”

This may require some education, as well.

“It isn’t clear if the consumer is ready for this schedule, but providing that information can help make it as painless as it can be,” Green added.

Much of the driving pickups usually do can be considered “severe” or “extreme” driving.

“Pickup trucks are frequently pushed to their limit and are often used for hauling, towing and off-road travelling,” said Josh Hansen, Northern California training manager at Oilstop Inc. “This is important to consider when making service recommendations to help extend the life of these work vehicles and reduce ‘down-time.’”

Automakers are even educating customers of the need to ensure that service is handled accordingly for those who regularly use their vehicles in the conditions that most wouldn’t consider normal daily driving.

“Ford truck manuals now not only have a ‘severe service’ schedule, but also an ‘extreme service’ for when these vehicles are worked extra hard,” Hansen said. “Having tougher emission requirements, diesel vehicles may have the need for diesel exhaust fluid and frequent fuel filter changes to help meet government standards.”

What customers may need to understand, too, is service should be on a more regular schedule, but may not always be routine for shop operators. The more frequent service could also directly relate to how long these vehicles take to be serviced, suggested Hansen.

“Many (trucks) have large, metal skid plates or aftermarket suspension and lift kits that make the job more challenging,” Hansen explained. “Appropriate training is required, as well as proper support from management and administration on new development and changes within this market on how to best serve these guests. Areas with a larger amount of trucks may need to consider different staffing guidelines to accommodate the surplus of these vehicles.”

Another consideration for some shops is to ensure that diesel pickups can also be serviced. This includes stocking the right oils and other products for those vehicles.

“If we’re seeing a lot of diesels, we make sure we have the right items in stock,” Ali explained. “We do a bit of diesel, but most of the trucks we service are gasoline.”

Another part of training that needs to be considered is in regard to four-wheel drive vehicles, especially larger pickups and SUVs.

“We do see a lot of four-wheel drive pickups, and that presents opportunities as well as challenges when we work on the transmission,” Ali said. “It is something you just don’t see on most cars.”

Given these considerations, shops should alert customers that the work could take longer — and given the state of the market, this might mean backups for the servicing of pickups, especially as sales could continue to increase.

Even with the damage the hurricanes brought to the market, it is likely that the sales dip will be just a blip on the radar, and trucks could remain the choice for many consumers — provided fuel prices remain stable.

“The wild card is always going to be gasoline prices,” Green said. “But as the market grows, we’re going to see that shift to SUVs and trucks. That is going to continue, because it is still tough to go back to the sedan after you’ve hit the road in a larger vehicle.”