Pickup Price War Heating Up as Ram Knocks Off GM’s Chevy Truckby and
FCA boosts incentives on Ram by 29% to overtake Silverado
Heavy discounting seen continuing through the end of the year
It’s a good time to buy a truck.
To hold a slowing market at bay, carmakers in the U.S. are offering the biggest incentives on full-sized pickups since December 2008, when the country was mired in recession and the auto industry was collapsing. Last month, Fiat Chrysler Automobiles NV’s Ram raised its average incentive on the trucks to $7,082, up 29 percent from a year earlier, according to J.D. Power data obtained by Bloomberg.
A price war on pickups has been simmering for a while. Last year, Ford Motor Co. cut prices by more than $10,000 on some models as it rolled out a new aluminum-bodied F-150. This summer, General Motors Co. offered 20 percent off on its trucks. Ram is also continuing to offer a 20 percent discount on its oldest models.
Ram’s recent deal was its most generous in at least three years, and sales rose 29 percent in September. The company was the No. 2 seller in the U.S. truck market for the month, knocking off Chevrolet Silverado for the first time since at least 2010. Silverado sales fell 16 percent in the same period, and Ford’s F-Series, which has been the top selling pickup for almost 40 years, dropped 2.6 percent.
“In this race the Detroit Three have with each other, there is no limit to what they will do to win,” Dave Sullivan, an analyst at AutoPacific Inc., said in an interview. He noted that as truck inventories grow and factories cut back overtime shifts, automakers are falling back on an old tactic. “This price war is going to continue until the end of the year.”
Detroit derives much of its profit from pickups -- as much as $10,000 per truck -- and analysts expect the deals to get even richer as the market slows. Over the last three months, full-size truck sales have been growing at a 5 percent rate, compared with a 15 percent growth rate during the same period last year, Joseph Spak, an analyst for RBC Capital Markets, wrote in an Oct. 3 note.
Sales gains in September were “driven by discounts,” Spak wrote. Deliveries of large pickups rose 1.2 percent last month, according to researcher Autodata Corp.
GM groused about Ram’s September success, calling it “a pyrrhic victory at best.”
“Sure, they sold a lot of full-size trucks but they had incentives that were close to $1,000 more per unit than Chevrolet,” Jim Cain, a GM spokesman, said in a statement. “Profligate spending like that could set them up for a dead cat bounce.”
Fiat Chrysler spokesman Ralph Kisiel said the company was “not going to respond to a competitor’s comments.”
Ram appeared to outsell Silverado in March 2014, by 285 trucks, according to figures released at the time. Fiat Chrysler has since restated sales going back to 2011 after a dealer lawsuit spurred a U.S. Justice Department investigation into whether its figures were inflated to mislead investors.
Last month, Ram outsold Silverado by 2,412 trucks. Silverado outsold Ram in every other month since 2011, according to Kisiel, the company spokesman.
GM boosted discounts on the Silverado in September as well, averaging $5,647, up 21 percent from August, according to the J.D. Power data. The F-Series averaged incentives of $5,173, down about $43 from the month before.
The discounts have also grown as trucks have gotten more expensive. Pickups have added creature comforts and technology to improve fuel economy, towing and hauling capacity. Automakers are offering bigger incentives to combat sticker shock.
“People want trucks, but they’re finding that they’re not affordable,” said Michelle Krebs, an analyst with Cox Automotive’s Autotrader. The greatest imbalance between shopping interest and inventory on Autotrader’s site is in the pickup segment, she said, an indicator that at this point, demand for used models far outstrips supply. The new trucks have “just gotten so expensive.”