Luxury car owners trade up for American pickups as Ford, GM and Dodge trucks dominate market

General Motors delivered Wall Street an unexpected surprise this week, substantially topping Wall Street earnings forecasts for its third quarter, and it wasn’t because it’s selling more cars.

The Detroit automaker is racing to keep up with demand for its new Chevy Silverado pickup which was completely redesigned for the 2019 model-year. In particular, shoppers appear especially enamored with the new High Country model that can be loaded up with features like heated seats, a heads-up display on the windshield and even active noise cancellation.

Check all the boxes and you’re pushing into the $70,000 range — about the same as a fully loaded Mercedes AMG E 43 high-performance luxury sedan.

While trucks have traditionally been the sort of vehicles you’d expect to see on a farm or at a work site, demand has been surging among regular buyers who are opting out of sedans and coupes and replacing their family vehicles with pickups and SUVs. And some of the biggest demand is coming at the high-end of the truck spectrum, with luxury buyers favoring lavishly outfitted pickups like the Silverado High Country.

In fact, that $70,000 for a fully loaded Chevy truck might seem like chump change to fans of the Ford F-Series, long the nation’s best-selling pickup line. According to research firm J.D. Power and Associates, $50,000 is the slightly blurry line between mainstream and luxury in today’s auto market. And Ford now has a variety of different versions of the light duty F-150 that break that barrier, starting with the King Ranch edition at a base price of $52,390. Last year, the automaker added a new Super Duty Limited version that can nip $97,000 out of the factory, with aftermarket options sold by Ford dealers pushing it into six figures.

And as Doug Scott, the long-time head of Ford truck marketing told CNBC before his recent retirement, “every time we add a new premium edition, buyers tell us they want more.”

Across town, Fiat Chrysler’s Ram brand has caught onto the new truck market math. It’s also got an all-new half-ton pickup this year, and the Ram 1500 Limited edition. After adding features like the 19-speaker Harman/Kardon Sound system, the “Limited Level 1 equipment group,” heavy-duty shocks and other accessories, will top out at $90,325. And that’s before factoring in delivery fees.

Such high-line products might seem to be running counter to current industry trends. “Affordability may be the canary in the coal mine,” warned Jeff Schuster, chief global vehicle forecaster at LMC Automotive ahead of the release of October’s new vehicle sales numbers.

Overall, sticker prices have risen sharply since the end of the Great Recession and, with interest rates now rising, that appears to be catching up with the industry, taking a chunk of the blame for why demand is expected to dip for the second year in a row despite a generally strong economy.

But it’s largely at the low end of the market where cost pressures are hitting hardest, Tyson Jominy, the managing director of data and analytics for J.D. Power, noted that sales of vehicles priced under $20,000 are off by about 20 percent for the first 10 months of 2018. As you move up the price ladder, however, the fall-off recedes. And, among vehicles priced above $80,000, “sales are up 25 percent,” he said.

If anything, officials with Detroit’s Big Three suggest they are struggling to keep up with demand for their new pickups, especially the higher-priced offerings. Fiat Chrysler’s new CEO Mike Manley said this week that it may continue producing a higher-priced, heavy-duty version of the Ram truck at a plant in Saltillo, Mexico to supplement production at the company’s U.S. assembly lines. His predecessor, Sergio Marchionne, had planned to pull the truck out of Mexico under pressure from the Trump Administration, moving it up to Detroit but demand could support three plants, according to Manley.

Pickup truck sales sank like a stone during the Great Recession, demand hammered by a variety of factors. Buyers of classic work trucks were struggling just to stay in business and weren’t investing in new wheels, if at all possible. Urban cowboys were also facing tough financial realities made worse by record gas prices.

Light trucks, in general, have benefited from the nation’s economic revival at the expense of sedans and coupes. SUVs and crossover-utility vehicles now account for half the market. Add in vans and pickups and that climbs to roughly two out of three new vehicles sold so far this year.

Parse the numbers a little more closely and you’ll find that a full third of all pickups sold through the end of October carried sticker prices of more than $50,000, according to Power data. Now, that can be a bit misleading. Buyers can run up a truck’s price with features like winches, heavy-duty “fifth-wheel” towing hardware and other work-related options, But as much as one in five pickups are true luxury vehicles, said Jominy, compared with about one in 20 a decade ago.

Nowhere is this more obvious than in Texas, where pickups alone outsell sedans in some parts of the Lone Star State.

“The high-end ones are now just like a luxury car,” said Marsha McCombs Shields, dealer principal at the Austin-based McCombs Auto Group, one of the state’s largest Ford dealers. “You have a multi-purpose vehicle that can do everything. Your whole family can fit in it. You can use it for hauling. You can tow with it. You can work with it. It’s acceptable for everything.”

McCombs said that demand for high-line trucks has grown with each new and more expensive model Ford has added to the F-Series line-up. And even with the arrival of the Super Duty Limited last year, she said, the carmaker may not have hit the limits. Every month, at least one buyer adds enough aftermarket options to drive off with a pickup priced at more than $100,000.

“There are just some people who want to have the best truck on the block,” said McCombs.

It’s not just the availability of more features, said Stephanie Brinley, principal auto analyst with IHS Markit, but the addition of distinctly different model variants “that speak to different types of buyer.” Not far behind the limited is the beastly Raptor model that features off-road tires and shocks and the most powerful engine available in the F-150 line-up.

Even if you ignore unique-to-truck features like those off-road tires, spray-in bedliners and cargo tie-downs, a luxury shopper will find virtually all the features of a high-line sedan now offered on top-end pickups. These include such things as:

  • High-end audio systems, like the package on the Ram 1500 Limited;
  • Premium leather, wood and metal finishes, like those on the new-for-2019 GMC Sierra Denali Ultimate;
  • The Ram 1500 Longhorn opts for leather skin-patterned leather and what looks like a branded logo on the real wood glove box cover;
  • Active cruise control, blind spot detection and automatic emergency braking, available on high-end models from all three Detroit carmakers;
  • Heated and cooled front seats and even the heated rear seats on the Fort F-250 Limited;
  • A near Tesla-sized touchscreen display on top-line Ram models;
  • In-car WiFi, USB ports, a multi-zone climate system and even two 120-volt outlets on the 2019 Silverado High Country.

Luxury trucks are still a relatively new phenomenon. Ford teased the concept in 2000 with a well-equipped special edition dubbed the F-150 Harley-Davidson, adding the King Ranch for the 2003 model-year and the Platinum in 2015.

Whether the segment will continue to grow is far from certain – though one can ask that of the entire pickup market. Demand for trucks has traditionally been sensitive to the ups-and-downs of the economy, though that’s especially true for vehicles used for work.

Fuel costs could also play a factor, though analysts like IHS Markit’s Brinley note that automakers have been taking steps to reduce the potential impact of another price surge – and to meet the tough new fuel economy standards ahead.

V-6s, especially turbocharged EcoBoost versions, now account for roughly two-thirds of F-150 demand and the automaker is bringing out a diesel and working on a hybrid model. The 2019 Ram 1500 is available with a so-called “mile hybrid,” known as the eTorque system. It not only improves mileage but also improves launch performance and provides power for a variable suspension system.

Industry analysts and planners alike continue to debate whether the current boom in light truck sales is a fad or a long-term shift, though the latter is looking more and more likely.

Barring a sudden U-turn, Sandor Piszar, the truck marketing manager at GM’s Chevrolet, said he’s confident more and more luxury buyers “will want these loaded-out trucks.”

And while Detroit automakers have clearly taken the phenomenon to new levels, their import rivals are also trying to capitalize on the trend, Toyota looking for ways to win luxury buyers over with better-equipped versions of its Tundra pickup, Nissan in the same hunt with its Titan line.

Even Mercedes-Benz is studying its options. The German luxury brand last year launched its first pickup, the X-Class. It’s smaller and less robust than the full-size pickups sold in the States, one reason Mercedes isn’t selling it here. But Dieter Zetsche, the CEO of Daimler AG and the head of the Mercedes-Benz brand late last suggested the time “may be ripe” for it to get into the American truck game. If it does, it would only give luxury buyers another reason to trade in their sedans and coupes for a pickup.

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