Why Chrysler’s Ram Has General Motors Company Worried

The latest version of the Ram has helped Chrysler gain ground in the hot U.S. pickup market at GM's expense. Photo credit: Fiat Chrysler Automobiles

The all-new 2014 Chevrolet Silverado was a big step forward for General Motors  (NYSE: GM  ) . No longer would GM rely on heavy discounts to boost pickup sales. Instead, GM would keep its discounts modest and rely on the truck's quality to keep sales strong, boosting the profit it made on every sale.

Or at least, that was the plan.

Has it worked? Yes and no.

On the one hand, GM's new trucks were well-received by critics, and average transaction prices have been very strong. On the other hand, GM has lost some market share in the extremely important U.S. pickup marketplace. 

It's not a surprise that pickup leader Ford (NYSE: F  ) has gained some ground at GM's expense. But as Fool contributor John Rosevear explains in this video, Fiat Chrysler's (NASDAQOTH: FIATY  ) Ram trucks have also made some big gains in this market -- and that should have GM's leadership concerned.

A transcript of the video is below.

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John Rosevear: Hey Fools, it's John Rosevear, senior auto analyst for Fool.com. Something really interesting is happening in the pickup market, and it's something that should have the folks at GM a little concerned.

GM, of course, introduced its all-new Chevy Silverado pickup last year, an extremely important product, and with it they took a different approach than they had in the past. Unlike in the past, where GM has relied on big incentives to keep its pickups selling, GM put a lot of effort into making the new Silverado a more polished product, and their plan was to be stingy with the discounts.

That has worked out in one sense: the average transaction prices for GM's pickups are way up. They're making more profit on every truck. And GM's new higher-end trucks seem to be doing quite well.

But they're selling fewer trucks overall, at least relative to the competition. Barclays auto analyst Brian Johnson said in a recent note that GM's big pickups have lost over 3 points of market share since the beginning of 2013. Ford has grabbed about half of that share -- that's no surprise. Ford's F-Series is the market leader and Ford is very very good at keeping it out in front. But Chrysler's Ram pickup has also increased its market share, up 1.8 points according to Johnson.

Now, some of that may have to do with incentives, small business buyers can be very price sensitive, and Chrysler is still much heavier-handed with the incentives than the other guys. And if the Ford guy says we'll give you a $4,000 discount and the Chrysler guy says we'll give you a $5,000 discount and the Chevy dealer says well we can't do any more than $1,500, well, that might be the end of the discussion for a lot of buyers.

But it might be more than that.

The current version of the Ram has received very good reviews. It's a very nice truck to drive and I imagine they sell quite a few just on the test drives, and it's got some other things going for it. Ford has made a big deal out of their fuel-efficient EcoBoost V6s. They've advertised it heavily and they've sold quite a lot of them, but Chrysler kind of one-upped them back in February by offering a diesel in the light-duty version of the Ram, the 1500, and that is looking pretty popular.

GM has been more aggressive in the last few weeks. They declared March to be "Truck Month" at Chevy dealers and they've been offering much, much bigger incentives, up to $7,500 dollars on some versions, and they've been running ads during the NCAA basketball tournament. We'll find out next week whether that promotion helped GM's sales in March, but the real question is, what will these big discounts do to GM's profits? We'll know more about that when we see GM's first-quarter numbers in a few weeks. Thanks for watching.

Are you ready for this $14.4 trillion revolution?
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer Amazon.com in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.


Read/Post Comments (3) | Recommend This Article (1)

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 March 31, 2014, at 7:14 PM, lem2004 wrote:

    We will see how well they like their Ram when it starts falling apart in a year or so.

  • Report this Comment On April 01, 2014, at 9:48 AM, TMFMarlowe wrote:

    @lem2004, five years ago I would have nodded in agreement. But these latest Rams seem like pretty nice trucks. Have they turned the corner? We'll see.

    Thanks for stopping by.

    John Rosevear

  • Report this Comment On April 03, 2014, at 10:43 PM, LouisTewl wrote:

    Notice how JR insinuates that it's all about the incentives, and how he's comparing FCA to Chevy, but not Ford, and says FCA "kind of one-upped them" (Ford), with their eco-boost diesel, but doesn't mention the key fact that it's MPG is significantly superior to Ford's?

    The KEY to interpreting ANY JR/TMF article about the auto industry, particularly as it relates to FCA, is the following at-end-of-article "Disclaimer":

    "John Roseveer owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. "

    With the way JR/TMF continually and consistently try to poison the perception well with regard to FCA, that disclaimer should be at the BEGINNING of the article, not the end.

    TMF/JR is NOT "educating, amusing, OR enriching" its readers, they are only trying to make THEIR OWN STOCK GO UP, and they are absolutely shameless.

    FCA just this week broke through their annual high, and are still around $12.00 per share, and will continue to lead - but you won't read about it here.

    My policy, when reading ANY TMF "article," is to FIRST scroll down to the end of the "article" and read the "disclaimers", THEN read the "article."

    You just HAVE to, and that is sad.

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