Detroit Trucks are Second to None, Sorry Toyota


Photo courtesy of Ford.

"Quite simply, it's a great time to be in the truck business," said Kurt McNeil, head of General Motors sales operations in the United States. He's right, that simple sentence pretty much nails it. Full-size pickup trucks is the most profitable vehicle segment in the U.S. market and has historically been dominated by Detroit's Big Three automakers, General Motors (NYSE: GM  ) , Ford (NYSE: F  ) , and Chrysler. I'll explain why these sales are here to stay and why there's such an advantage for Detroit over its Japanese competitors.

Good old days
As you can see in the chart below, which details America's three top-selling trucks, sales are still far below peak selling numbers prior to the recession.

The full-size truck segment looks to continue the trend of increased sales, and comparing year-to-date sales to last year's, the F-Series, Silverado, and Ram have surged 21.7%, 23.9% and 22.7%, respectively. That's good news for Detroit's Big Three because the segment brings in a majority of their profits – but it gets better.

Not only does the full-size truck segment bring in a majority of profits, the margins are looking even juicier this year as transaction prices continue to rise and cash incentives remain lower. In fact, looking at the graph below you can see how much more transaction prices for trucks rose compared to the rest of the industry.


Data from Edmunds.com

Moreover, seemingly steadily increasing sales have allowed automakers to better optimize for production – further boosting profits.

"Full size truck sales continue to gain momentum in May and we expect the segment to post a 22 percent increase compared to the nearly nine percent industry increase," said Jesse Toprak, senior analyst for TrueCar.com. "Stability in the industry is now the norm, which is a positive for automakers as it results in the ability to optimize production levels, therefore improving profitability."

Detroit's edge
Japanese manufacturers have had a stranglehold of their own on other vehicle segments, like the midsize sedan vehicles. But when it comes to the enormous profits generated in North America, Ford, GM, and Chrysler completely dominate, combining for nearly 92% of the full-size truck segment.

If you break the numbers from 2012 down, Ford's F-Series was the market leader with 38.5% market share. GM trailed slightly with a 35.8% share, combined from its Silverado and Sierra trucks that individually had 26.4% and 9.4% shares. Chrysler's Ram came in third with 17.5%.

Down the road
What's most important for investors is that sales of full-size pickup trucks – and massive profits – don't seem to be ending anytime soon.

"They're all creating a perfect storm of a very radical recovery for the truck segment for the next couple of years," TrueCar.com's Toprak said. "The replacement demand of the full-size truck segment is actually going to be very, very high for the next several years."

I believe Toprak is exactly right because of the multiple factors that create the perfect storm of recovery he mentions. Firstly, replacement demand will stay strong because the average age of trucks on the road sits at about 13 years, much older than the rest of the industry. Secondly, the construction and housing rebound, in combination with North America's recent energy boom, could keep demand for full-size trucks strong over the long term. Thirdly, we're seeing a resurgence in overall popularity of the truck in the U.S. market. "The truck segment really shows no sign of slowing down," Alec Gutierrez, senior market analyst for Kelley Blue Book, told AutoNews. "A lot of those consumers who sat on the sidelines are now jumping back into the market, even though they don't have a job in construction and they're not hauling anything."

Foolish takeaway
Consider this: The last time full-size pickup truck sales were going this well, all the profits generated went to cover up massive failures in other vehicle segments. Detroit automakers couldn't give away their vehicles without losing money through massive cash incentives – no one wanted to own a Detroit small car. Today Ford and GM are making  serious progress in those segments with the Fusion stealing market share each month on Toyota's Camry. GM is also taking huge strides with its Cadillac lineup, having its best year-to-date surge since 1976 driven by its ATS and CTS models.

It's very different this time around; these full-size pickup profits will be going to the bottom line. I expect Ford, who is years ahead of GM in lean operations, to have very strong bottom-line profits and margins for its second-quarter earnings call, and the good news should continue throughout 2013.

These massive profits from full-size trucks could help fuel Ford and GM's investments in China – the world's largest and fastest-growing auto market. Will that make them the best two automotive investments? A recent Motley Fool report, "2 Automakers to Buy for a Surging Chinese Market", names two global giants poised to reap big gains that could drive big rewards for investors. You can read this report right now for free – just click here for instant access.


Read/Post Comments (29) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 12, 2013, at 5:42 PM, yahoouser4529 wrote:

    These Detroit trucks are not for me. I'm satisfied with my 4 cylinder sedan

  • Report this Comment On June 12, 2013, at 6:04 PM, mrdrysdale64 wrote:

    They can keep their Dodge trucks and I'll keep my two Tundra's!

  • Report this Comment On June 12, 2013, at 6:05 PM, TMFTwoCoins wrote:

    Fair enough, for sure. There are many that think the same way.

  • Report this Comment On June 12, 2013, at 6:06 PM, TMFTwoCoins wrote:

    To clarify

    My Fair enough comment was towards @yahoouser4529.

    @mrdrysdale64 , Also fair enough, although I'm not sure as many think the same way!

  • Report this Comment On June 12, 2013, at 6:08 PM, 1945ivac wrote:

    As long as gasoline is not to expensive than trucks will continue to sell as they hold their value pretty good thank you for the article respectfully

  • Report this Comment On June 12, 2013, at 6:26 PM, Dadw5boys wrote:

    Show trucks for old retirees ?

  • Report this Comment On June 12, 2013, at 6:33 PM, VegasSmitty wrote:

    My 96 Nissan trucks still working. Not many others can say that!

  • Report this Comment On June 12, 2013, at 6:44 PM, vsawmike wrote:

    The facts don't lie. Toyota and Honda EACH recalled more vehicles in 2012 than Ford and GM combined. The Fusion for 2013 is one of the best cars Ford has ever made and is light years ahead of Camry and Impala.

    The tide is turning folks and American cars are now better than foreign brands.

    American trucks have always been better than foreign trucks and will always be. Foreign manufacturers do not understand the large truck market in the US. The numbers do not lie, 92% of the market. Wow, Tundra, Titan and whatever that funny looking thing Honda makes is... you have your work cut out for you.

  • Report this Comment On June 12, 2013, at 6:51 PM, pschlutt wrote:

    I love US trucks, but I am inclined to buy a Toyota because the big 3 truck makers do not have the smaller trucks, or their smaller trucks are not of the same quality as Toyota's Tacoma.

  • Report this Comment On June 12, 2013, at 6:56 PM, underoath12 wrote:

    @vsawmike you can keep your big hunkin gas guzzler american trucks for yourself.I'd like to see the day when gas goes up to 8-9 dollars like in Europe for example.See how you like driving them american trucks then.Probably you'll eat P&J sandwiches so you can afford driving those things around.Hehe

  • Report this Comment On June 12, 2013, at 7:00 PM, KARPAUL wrote:

    I would never drive a Toyota truck, I work for a Toyota dealer in a parts dept,and customers get sticker when I quote parts prices very expensive trucks to maintain,I have driven our parts truck Tundra crew max 5.7 litre,and what a god awful quality of truck that is alwayts smells like cheap plastic when you get in. and it handles very akward no road feel at all.no thanks keep your toyotas trucks, I have enjoyed my Amercian truck a lot better

  • Report this Comment On June 12, 2013, at 7:03 PM, aerguiza wrote:

    Problem with these articles are mostly one sided. Why, if you say tthat american vehicles last a long time, then why do they break down in tropical islands. or other countries that are humid. Yet, Japanese cars last longer than american vehicles and american vehicles rust faster. Also for those who naive, Toyota just built auto plants just recently. Camry, and highlander are now manufactured in U.S. If you look at the new cars, U.S. is redesigning to be more sleek like Japanese or Korean Cars. Come to think of it, who was the one who established Hybrid cars. For sure it was not american cars. So, folks lets not be bias.

  • Report this Comment On June 12, 2013, at 7:32 PM, sro380 wrote:

    I purchased a 2010 Ford F150 XLT, MSRP $42K, city driving got me 11 mpg. Kept it for 6 months and tried to sale it, was told it was only worth $26k because Ford kept giving huge rebates. Was able to get $30,500 trade on a new Toyota. Will never go American again.......

  • Report this Comment On June 12, 2013, at 7:43 PM, jmhenry36 wrote:

    TRUCKS IS ALL THE AMERICAN AUTO INDUSTRY HAS!

  • Report this Comment On June 12, 2013, at 8:04 PM, bugmenot wrote:

    Never owned a Ford, GM or Chrysler product, and never will.

    Japanese products are better made all around. My father owns a Ford F250 and has had nothing but problems. The "recall" for the Ford cruise control defect was to install an in line fuse...

  • Report this Comment On June 12, 2013, at 8:12 PM, jimf48 wrote:

    Ok people,let"s be fair, Ford's engines come from Canada, as do GM. Ram engines come from Mexico, There is no such thing as an American care anymore unless you buy a Tesla.

  • Report this Comment On June 12, 2013, at 8:21 PM, jr1411 wrote:

    As far as US made trucks goes. AMERICAN TRUCKS RULE. I own 2 F250's/ One has the 7.3 ltr. turbo diesel. The other has a gas engine. One F350 with the 5.7 gas engine. One Dodge 2500 with the now legendary Cummins 5.9 diesel. One 2012 Chevy Tahoe. Tome : The best and finest trouble free trucks for both my business and personal use.Zero problems outside of regular maintenance.

  • Report this Comment On June 12, 2013, at 8:41 PM, WhiteHatBobby wrote:

    In fact, the bigger issue coming is the smaller truck market, which Ford and Ram have abandoned because of the 54.5 MPG CAFE standard. GM is working actively on bringing the mid-size truck in Asia and Australia here, but has delayed it in order to give it a "North American truck" look before building it in Missouri (re: baby Silverado/Sierra) and reportedly with a small turbodiesel and the Silverado V6, and dealers reportedly also want the SUV variant to replace the crossover (a jacked-up sedan that can't do what a real SUV can do). If this pans out, Ford will almost have to go to work immediately to challenge Toyota, Nissan, and GM in this market.

    The truck market has long been domestic dominated because the US has long not had the engine size restrictions that Japan has. Liberals have targeted the truck market because trucks symbolise a nation that builds.

  • Report this Comment On June 12, 2013, at 8:45 PM, altmd71 wrote:

    Had a Tundra in 08, what a piece of junk.

  • Report this Comment On June 12, 2013, at 8:52 PM, Tacoma2001 wrote:

    I wouldn't buy an American a car or truck you buy a Tacoma and you want have problems that you do with American trucks and when you get ready to sell them they lose their value buy Toyota and you want have them problems I have Toyota Tacoma and a Toyota Avalon and if you want your money's worth buy toyota

  • Report this Comment On June 12, 2013, at 8:59 PM, bugmenot wrote:

    My Texas made Tundra has been very good to me. The 5.7L simply does its job on towing up to 10,000 lbs on regular gas.

    Toyota doesn't need to win the truck market. They just have to stay in business with it.

    So what is there to be sorry about?

  • Report this Comment On June 12, 2013, at 9:25 PM, KevinS1527 wrote:

    When I was looking for a truck I wanted something that was sporty, could seat 4 comfortably, be sharp enough to take out on the town for a fancy night out, tow my various boats/trailers all over WA state, and hold its own at the drag strip. That is why I own a 2003 Harley F150 with the supercharged 5.4. There is simply no foreign truck that measures up. It has over 500hp/600tq (I hot rodded it a little), tows the boat over the pass in overdrive at 70mph full of gear and 3 friends, handles pretty good, gets compliments all the time, and puts a smile on my face pretty much every time I pull it out of the garage. Cant ask for much more. I drive German cars, Japanese toys (ATV/jet ski) but will always drive a good ol American pickup truck!

  • Report this Comment On June 12, 2013, at 10:09 PM, ziggyfff wrote:

    I have a 2004 Tundra which has never been back to the dealer except for a recall on a bearing... towed a 12 ft. mover trailer of 10,000 lbs across country twice at 22mpg and quiet as a mouse....never would buy differently

  • Report this Comment On June 12, 2013, at 10:10 PM, blue02formula wrote:

    I worked for Delphi Packard Electric and designed the inspection tools for the electrical centers in GM trucks. The folks in Mississippi won a Global Excellence award for quality. Delphi rewarded them by sending the equipment, tooling and jobs to China. Most of Delphi workers in the United States were GM employees until they spun us off and shut most of the plants down. This was a huge part of the auto industry being crippled in the United States and all the supporting industries. GM caused the mess and then asked for American tax payer money to bail them out. My next vehicle will most likely be an Acura MDX.

  • Report this Comment On June 13, 2013, at 12:11 AM, westpac1955 wrote:

    I bought a 2008 Ram 1500 after a couple parts fell off (search UAW workers smoking dope and drinking on breaks),a rough idle that couldn't be fixed for more than 3 days in a row and seats that felt like they had 1/2 inch dowels in them I traded it. My 2010 Tundra exudes quality and with it's 5.7 will run over a Ram 1500 with the Hemi and not 1 dollar going to union coffers only to be handed over to the regime. I spent 40 years almost exclusively driving G.M. but will never own another General tao Motors/Govt Motors automobile again.

  • Report this Comment On June 13, 2013, at 8:02 AM, freedom1776 wrote:

    The American trucks are fine if you like 9 to 10 thousand pound, pig mobiles. Detroit never learns; remember the 1980's cars that were 6ft wide by 17ft long, land whales. Meant for the my truck's bigger than your truck. American greed and false pride knows no bounds. The bigger the pig, the higher the price, the greater the profit. Meanwhile planned obsolesence is the next step Detroit will follow, just like days of old. American culture is crude, wasteful and on displayed for all to see by Detroit Motors.

  • Report this Comment On June 13, 2013, at 8:07 AM, mjomojr wrote:

    Believe what you will. Owned my last "north american" vehicle 10 years ago.. Drive toyotas, 5 of them, will to the end. Good luck sheeple!

  • Report this Comment On June 13, 2013, at 11:47 AM, Sirjana wrote:

    Regarding Ford truck fuel economy, this video from a few years ago comparing V8 truck fuel economy didn't exactly have Toyota stomping on the competition:

    https://www.youtube.com/watch?v=GuExSuwZibg

    The next video compares Ford F350 Super Duty diesel pickup vs Chevy's Silverado 3500 HD diesel pickup. The Japanese manufacturers do not compete in the heavy duty pickup market

    https://www.youtube.com/watch?v=vwszx2KgRNs

    These may appear to be fuel-swilling brutes, but for what they do, haul and tow heavy loads, they are actually the most efficient vehicles on the market.

    Toyota and Nissan have been in the US pickup market for over a decade with large pickups, and if they truly had a compelling advantage over the products offered by US companies then they would be taking market share, but they don't and they're not. Businesses such as construction companies, oil well servicers, ranchers, landscapers, and others buy literally hundreds of thousands of pickups every year, and if their bottom lines could be boosted by switching from Detroit Three trucks to Toyota or Nissan, they would, but they're not.

    I work for Ford but these comments are my own opinion, not official company position.

  • Report this Comment On June 13, 2013, at 3:25 PM, KevinS1527 wrote:

    Some people on here are so full of it. Towing a 10k lb trailer across the country in a Tundra and getting 22mpg? So your saying your truck gets 4mpg better mileage than the (unloaded) EPA estimate while hauling? Doesnt make sense.

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