Why Startups (and Tesla) Will Struggle With Electric Pickups

How will Tesla's (NASDAQ: TSLA) Cybertruck fare against Detroit's huge-selling pickups? In this Motley Fool Live broadcast, recorded on Jan. 12, Industry Focus host Nick Sciple and Fool.com senior auto specialist John Rosevear explained why they see pickup trucks as an important trend for auto investors to follow in 2021 -- and why Tesla and other new entrants will have a tough time in this hugely profitable market segment. 

A transcript is below the video. 

Nick Sciple: John, what's your last trend for cars for 2021?

John Rosevear: It's a trend that we can talk about every year, really. But I want to talk about it mostly so that folks remember that it's still here. Americans buy a lot of pickup trucks, a lot of pickup trucks. These are the best-selling vehicles in America, and they held up surprisingly well through 2021. We had factory shutdowns, and people sheltering at home, sheltering in place during the height of the pandemic earlier in the year, the first height of the pandemic. But Ford (F 0.69%) and General Motors (GM 1.20%) still sold a lot of pickups, Fiat Chrysler too, in 2020.

These are massively important, massively profitable products. They will go electric in time, Ford and GM have already made it pretty clear that those things are coming soon. In fact, Ford has said they'll have it out and about a year-and-a-half, an electric F-150. But there's this whole ecosystem around pickups and commercial vehicles and so forth, where they're modified by companies called upfitters that adapt them for commercial fleet uses, for specific tasks and so forth.

This is a huge, huge business. It's a huge market. It's immensely profitable. That is not going to change, I don't think, as we move to electric vehicles, and people should remember that.

Americans buy a lot of pickup trucks, and 20 years from now, maybe they'll be buying a lot of electric F-150. But this market is here to stay, and it is a huge driver of profit for General Motors, Fiat Chrysler, the company that is merging with Peugeot to become Stellantis (STLA -1.05%). For these three companies, in particular -- Toyota (TM -3.23%) has an incremental presence with a few other smaller players -- this is big bucks. This is -- for a company like Ford, this is what's funding the EV revolution, F-150's and Super Duty [pickup trucks]. Investors should remember that and watch this market. Because this market, if Detroit defends anything, it's going to be pickups and commercial vehicles. I think new entrants are going to find vigorous resistance and vigorous competition as they try to enter it, and I think many investors downplay that, and don't realize how big that is.

Nick Sciple: Yeah. I was going to your point, John, around maybe stickiness of truck sales is just for autos across the board, whether it's if you're a Tesla owner, or if you're someone who likes Corvettes or Jeeps or whatever, there's this identity that people have with their cars. Once you become an F-150 person or you're a truck guy, it's hard to get you off being a truck guy, and I think a lot of people know that these type of people will just in their everyday life.

If you look around and see that just to put some numbers which you said earlier, so this is from a 2019 Barclays estimate was in the Wall Street Journal. Truck sales have historically counted for around 70 percent of Ford's global profit and around half of GM's global profits. So absolutely, I mean, this is the lifeblood of the business. This is where the earnings are coming from.

Then lastly, just to look at the size of this sales lines. The F-series has been the top-selling pickup truck in the US for more than 40 years. Part of that is the F-Series is under one label. Actually, this year, GM outsold Ford in there with the Silverado and GMC Sierra just by a little bit. On the numbers for these vehicles, 787,422 Ford F-Series sold in the year 2020, and that was down 12 percent year-over-year, just to give you context. There's just some massive sales of this vehicle. Tesla in 2020 had a record year, around half a million vehicles.

I mean, there are shares in this market that are really, really significant. Two ways to think about that is Tesla has a big hill to climb to overcome the scale thing, or you could interpret it as this is a whole bunch of market share to go gobble up as they push in trying to take profits with Cybertruck and things like that. We'll just see how they are able to execute. But any last thoughts, John, on this pickup market, and I want to take these last 15 minutes or so to answer whatever questions folks have. I'm sure folks have a lot.

John Rosevear: Just wanted to say one thing which is that Ford sold 787,000 pickups in 2020, despite the fact that their factories were down not only during the COVID disruption, but because they were changing over to the all-new truck which began shipping at the very end of November, the all-new F-150. Which required, I mean, they estimate they lost something like 60,000 units of production as they switched over their factories to make the new truck. The last time we saw GM lead was when Ford was switching over to the last new F-150 in 2015. These are monster products and it's where you really see -- particularly Ford -- throw everything it knows and everything it has into every new truck. It's why they continue to do so well here, and it will be a daunting task for anybody who thinks they're going to try to disrupt this.