Business

Chevy is working on a truck that could be the first pickup to top $100,000

Silverado 1500 with a new for ’20 diesel

(c) 2019 Paul A. Eisenstein | TheDetroitBureau.com

At a time when U.S. automotive sales have begun to decline for only the second time since the Great Recession, demand for pickups — and the prices some die-hard fans will pay for them — has defied gravity.

Manufacturers like General Motors are updating their lineups more frequently than ever, increasing the number of trim packages, powertrain options and creature features, like Apple CarPlay, projected displays and infotainment systems.

That’s kept pickup prices rising at a rapid rate, especially for full-size models like the Chevrolet Silverado. Prices for full-size pickups have increased from an industry average of $32,557 in 2010 to $44,181 in 2018, according to data compiled by research firm J.D. Power and Associates. That rose, again, to $45,260 for the first five months of 2019.

And they’re about to rise again, if Chevy has anything to do with it.

Chevy is just rolling out an all-new version of its heavy-duty Silverado with the new High Country trim package that could become the first U.S. pickup to top $100,000, Chevy truck marketing chief Sandor Piszar said in an interview.

“People want to trade up,” Piszar said in an interview following a press preview of the 2020 Chevy Silverado HD line last week in Bend, Oregon. “If customers want a more expensive truck” than what the brand already offers, “We’ll deliver it.”

Pickup trucks are the workhorses of the automotive land. Historically populating construction zones, oil rigs, farms and the ranches of the Midwest, the first crew cab made hauling a family of five just as easy when the four-door pickup was introduced in the 1950s. Pickup, SUV and crossover sales have soared in recent year, supplanting to sedan and caravan as the family car of choice.

Pickups have carved out a particularly strong niche in the industry. Strong demand for the trucks have helped offset an overall 3% drop in new vehicle sales in the U.S. during the first five months of 2019. That would have been more severe were it not for truck sales, according to a report by tracking firm LMC Automotive.

The profit margins for pickups are also fatter, about $10,000 per truck, which can be several times the amount of a typical sedan, analysts said. Chevy’s Silverado, along with the GMC brand’s Sierra truck family are a “major contributor” to GM’s bottom line, said Piszar. And while he wouldn’t offer specific details, analyst Phillippi estimated the average Silverado provides “over $10,000 variable gross profit (while) at the high end, a Silverado High Country or a GMC Sierra Denali can get over $20,000.”

Silverado HD High Country with the Duramax diesel.

(c) 2019 Paul A. Eisenstein | TheDetroitBureau.com

That provides good reason why, at a time when GM is closing three North American assembly plants and cutting thousands of jobs it has been investing heavily in its pickup operations. In May, it announced it will invest $24 million to boost pickup capacity at its Fort Wayne plant.

“Sales have been very strong, and we are expanding customer choice with new models, more cab choices and innovative new powertrains,” GM CEO Mary Barra said during a visit to the factory on May 30 to announce the move. Less than two weeks later, Barra committed another $150 million to add 40,000 units of annual capacity to the Flint, Michigan plant producing the Chevy and GMC HD models. That was on top of previous investments totaling $1.5 billion at the Michigan factory.

The Silverado has traditionally been the U.S. market’s second best-selling full-size pickup, behind only the Ford F-Series. Ford actually saw demand for its popular trucks jump last year, selling 909,330 pickups, up from 896,764 in 2017. Chevy saw a slight dip in sales, moving 585,582 pickups last year from 585,864 the year before. And sales for the Silverado dropped 15.7% during the first quarter of the year.

Chevy officials downplay the decline, noting that production was hurt by the staggered roll-out of the new light-duty 1500, as well as mid- and heavy-duty versions of the Silverado. The factory in Flint, Michigan, which is building the brawniest version of the truck, only came back online after a major retooling, in February.

The Silverado has faced some tough new competition from the latest version of Fiat Chrysler’s Ram 1500 – which was named North American Truck of the Year this past January, but IHS auto analyst Stephanie Brinley agrees with Chevy. Chevy’s slip “is a changeover issue,” she said. “This is not where their sales will be in 18 months.”

Pushing into six-figure territory would be a significant jump for Chevy, which will top out just under $90,000 with the newly added High Country version of the 2020 Silverado HD just rolling into U.S. dealer showrooms now. But arch-rival Ford has come even closer with the Limited edition of its own F-Series Super Duty truck. A fully loaded one can run around $95,000 before factoring in taxes, delivery charges and other fees, as well as the many available aftermarket options.

“There’s not a lot of risk for them” to break the $100,000 mark, said Brinley, adding it is more likely a question of when. “There’d be no harm if it doesn’t work but, if it succeeds, it would earn a tidy profit.”

Chevrolet traditionally lagged behind the overall segment, according to Power, because it didn’t have the sort of high-line models, such as the Ford F-250 Limited. The arrival of the new Silverado High Country – as well as a production led shortage of some other models – helped drive up the Silverado ATP by $4,000 in April, versus the year before, at $41,700. During the same period, Ford’s average transaction price rose just $300, according to PIN data collected from thousands of U.S. dealers.

Buyers tend to cluster into two groups, those who need a serious truck for work and those who want a heavy hauler to match their lifestyle needs, such as hauling a boat or RV, or just to carry mulch and shrubs from the local big box store, said Chevy’s Piszar.

For lifestyle buyers, more and more see their pickups as the go-anywhere, do-anything alternative to a classic luxury car, according to industry research.

But even among those who use a truck for work, the demand for well-equipped vehicles is rising. That includes features that enhance functionality, such as the new Silverado HD’s diesel which helps boost towing capacity by 52% for 2020, to an industry-leading 35,500 pounds. The automaker has also introduced a multi-camera system that offers someone towing a trailer 14 different views, including “Transparent Trailer” mode, which appears to see right through the trailer to show traffic coming up from behind.

Customers for the Silverado — like those for competing Ford and Ram trucks — also can order plenty of creature comforts, such as heated and cooled seats, heated steering wheels and the latest infotainment technology.

“For people who make their living spending all their time in one of these trucks, they’re not afraid to spend the money to get the best truck they can buy,” said analyst Joe Phillippi, of AutoTrends Consulting, adding that he’d also be surprised if Chevrolet doesn’t add a model that will nudge over $100,000.

Lifestyle buyers are even more willing to spend the money, especially those who buy a truck to haul boats, RVs or horse trailers, said Brinley. “When people are towing things that can cost several times more than the truck, they’re willing to spend the money.”

Disclosure: Paul Eisenstein is a freelancer for CNBC. His travel and accommodations to the Chevy press preview in Bend, Oregon, were paid for by General Motors. 

Articles You May Like

Break The Cycle: How Your Beliefs Can Block Or Unlock Financial Success
Almost half of voters say student loan forgiveness is a key issue in 2024 election, survey finds
Nike shares slide on lackluster outlook, slowing China sales
Amgen wants in on the booming weight loss drug market — and it’s taking a different approach
Largest U.S. sportsbooks join forces to tackle problem gambling

Leave a Reply

Your email address will not be published. Required fields are marked *