Pickups Sales Plunging But Ford Buyers Spending More

Pickups Sales Plunging But Ford Buyers Spending More – What Gives?

May 12, 2009

By Bill Visnic

DETROIT — By now, everyone knows the raw sales numbers are bloody red: the full-size pickup market was one of the first to be savaged by last summer’s high gasoline prices and by the end of 2008, pffft — five points of market share and some three-quarters of a million units were gone.

Maybe never to return. At least to the segment’s former glories.

But there may be a sliver of a silver lining in the pickup sales plunge. At least one automaker — Ford Motor Co. — says those still buying pickups are splurging. Since its launch late last year, the “mix” of Ford’s new ’09 F-Series has been unexpectedly rich, slanted toward more expensive and heavily optioned models and trim levels.

The best example: the F-Series’ ultra-plush Platinum — the new top-of-the-line trim level — has run at 8 percent of the total F-Series mix. Ford predicted a 3 percent take rate.

Wait. We’ve been told those big-spending “lifestyle” pickup buyers are gone and to expect the segment’s remaining customers to be the sensible and more frugal “core” buyers. So what gives with the big proportion of fancy-pants pickup sales?

Those Buying Are Spending

Thanks to high gasoline prices and the general economic meltdown (and mix in a dose of enviro-pressure) experts figured the fast-fading pickup segment would revert to the “work” user — buyers unlikely to go for the luxury accouterments that long distorted our sense of the pickup’s main purpose.

“We anticipated the same thing,” said Doug Scott, Ford’s truck marketing manager. But it’s gone beyond the typical “launch mix” effect when new models tend to attract initial buyers that spend more. But by early April, the mix for the new F-Series was still running unnaturally rich, surprising Scott and Ford’s marketers.

Here’s Ford’s own copy for the Platinum: “New for the 2009 F-150 is the Platinum series, the most luxurious F-150 ever and the answer to a perennial question: Just how high-end do truck customers want to go?

They want to go pretty high, apparently.

Scott told AutoObserver it’s not just buyers glomming onto a new mega-premium trim level in the Platinum; the lavish King Ranch trim was running at 5 percent of F-Series build and the still-loaded Lariat trim also was “running ahead of expectations.”

Also contributing: the F-Series’ new Crew Cab body style, which adds a noticeable 6 inches of legroom for rear-seaters. It costs more, but build is running about 5 percent ahead of projections, said Scott.

It all adds up to ’09 F-Series transaction prices about $2,000 more than competing pickups, according to Ford chief sales analyst George Pipas.

“Never-Nevers” Did Leave

Buyers opting for high-end trim levels and more options surprised just about everyone, said Scott. But as one might expect, there are a variety of reasons, many unanticipated.

Scott said a baseline reason is the “general misperception” that image buyers made up a large portion of the full-size pickup market. He said the image or lifestyle buyer may not necessarily have been as quick as pundits predicted to abandon pickups. Only the “never-never” customers — those who never tow (or rarely use the bed) and never need four-wheel-drive utility — were the ones to drop pickups forever.

Moreover, plenty of lifestyle buyers have money for lifestyles that require pickups for towing power toys and campers or heading off-road. When the economy went bad, some of these customers left the market, but many stayed — and will stay — Scott said, because they require a vehicle that supports their passions.

Crash Changed Market Dynamic

Another factor to consider, said Scott, is the overall effect of the credit crunch. It created a market in which buyers who qualified for credit were disproportionately wealthy; their ability to afford more led to selection of vehicles with richer trim and higher equipment levels.

A “regular” industry environment would mean a lower mix of high-end trims, Scott said.

“Some [image buyers] went to the sidelines, but they didn’t all just leave. What we’re experiencing suggests that [image buyers massively leaving the segment] just isn’t the case.

“I don’t think we’ll continue to sell [Platinums] at an 8 percent rate,” he conceded.

Because of high fuel prices and the industry’s credit crisis, “We felt more people had gone to the sidelines,” said Scott. And they did. What was left was an atypical mix of customers — but a mix nonetheless, not just commercial/trade buyers.

Sixty percent of “core” buyers — those least likely to leave the segment — told Ford late last year they would buy a new pickup, but resale values had plunged to the point they couldn’t afford to trade.

Cue incentives.

Higher incentives made up the lost resale values and helped to convince buyers, Scott said. Those getting into the market were choosing highline trims at a disproportionate rate compared to the competition because the truck was new, but incentive money may have helped, too.

Sales Stink, Share Shifting

That brings Ford to its current place. It’s nice (and nice for per-unit profit) that a high ratio of F-Series sales continue to be upper-trim models and that transaction prices are markedly higher than the competition’s. Many are predicting an industry mini-recovery in the second half. And a used-vehicle scrappage program bouncing around Washington, DC, could boost projected new-vehicle sales by 1 million units or more.

But that doesn’t change the fact pickup sales are a shadow of the volume to which the industry became accustomed — or some might say addicted.

After the vile first quarter, Ford was tracking to sell, on an unadjusted basis, about 325,000 F-Series this year. There’s no coming anything near the number of F-Series it moved even last year (475,240, according to Edmunds.com), much less approach the heights of the early part of the decade.

Scott said Ford is hoping for total retail and fleet sales of 2 million this year. Compare even with the almost 2.9 million sales in a depressed 2008. That’s a deep sales and profit wound the industry won’t heal overnight.

Ford said it’s gained upward of 5-6 points of retail market share in the turmoil, and that’s what’s sustaining Scott “The people who are in the market like the new 2009 formula we put out there.”

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