Truck Model Roundup Class 3, 4 & 5
Business remains brisk, but a slowing economy and January price hikes cause some uncertainty.
Tom Berg
Senior Equipment Editor
So far, it's another good year. Following a very strong 2005, sales of light-medium trucks are up again. However, marketing people at the original equipment manufacturers don't sound jubilant. Sales hikes are actually modest and are expected to finish perhaps 5 percent over last year, when the rise was at least twice that. The economy has begun slowing, and price hikes scheduled for January, when more expensive diesels come on line, could further cool the frenzy.
Indeed, a falloff in sales of pickup trucks has already sobered some in the business. Due largely to spiking fuel prices, sales have fallen as much as 20 percent from last year, and the domestic Big Three builders – Dodge, Ford and General Motors – have cut production to better match demand. Large sport-utility vehicles are also affected. The Big Three have long netted much of their profits from these trucks, and shrinking sales are blamed for recent financial losses at the companies.
However, 2005 was a huge sales year, and comparing now to then doesn't exactly give a fair picture, notes Ford. Fuel prices have spiked before and then come down, as they are again doing. Pickup buyers need and like the highly versatile vehicles and will be back for new, more fuel-efficient models.
Among commercial customers, there's little or no pre-buy in Classes 3-5 like what's occurring among buyers of heavier trucks, especially Class 8, the builders say. To fleet operators, acquisition and operating costs are a major part of their businesses, and they are reacting rationally to looming price increases. But buyers of commercial light- and medium-duty trucks have other business worries. To them, trucks are a tool, not an end, and many buy when their old trucks break down or they see a sudden business spurt. They deal with prices at that point.
For truck buyers, the market's still a candy store. There's a big variety of makes and models to choose from. And price competition is intense, especially in the lower classes where DaimlerChrysler, Ford and General Motors duke it out. As usual, the Big Three dominate the market with conventional-style trucks, many of them using pickup-type hoods and cabs with heavier-duty frames and running gear, and featuring multiple cab and chassis choices. Importers field a more limited number of models, most of them low-cab-forward styles, and there are several recent entries in this already crowded segment.
Earlier this year, Sterling eased into the LCF market with a Class 4 model and has scheduled a Class 3 version for mid-'07. Called the 360, the truck is a rebadged Fuso obtained from Mitsubishi, whose commercial truck arm is affiliated with Daimler Chrysler, owner of Freightliner and Sterling-Western Star. Why bother with LCFs at all when North American buyers prefer conventionals by a margin of at least 80 to 20? Because that 20 percent is sold on the LCF's maneuverability and visibility advantages in crowded urban conditions, executives say. And it's better to provide something for Sterling dealers to offer than to let customers go to competitor dealers, where they might be tempted to buy heavier products, too.
Adding a bit of intrigue to the situation, Sterling said it's planning another new model, dubbed the Bullet, a Class 4 truck of undisclosed design to be obtained from a corporate partner, according to the announcement. Hmmm. "Bullet" could describe the hood of a conventional truck, and which partner has something like that? Freightliner? Its Business Class M2 barely dips into Class 5 (which is why it's not included in this roundup), and downsizing the lightest M2 would be an expensive way to go. Dodge? Its new Ram 3500 cab-chassis with an '07-spec Cummins Turbo Diesel is in the high end of Class 3, but its frame is noticeably beefy and seemingly capable of heavier loads. Yeah, that's it – the Bullet will be a Sterlingized Dodge Ram – maybe.
Meanwhile, some importers who sell LCFs say they're pleased at the reentry of Ford and International into the market because it'll bring more attention and credibility to this type of truck. That's Isuzu's and Mitsubishi Fuso's view. Nissan UD, on the other hand, wonders if the Ford LCF and the International CF500 and 600, built jointly in Mexico, will be good enough products to help the reputation of cabovers over the long haul. For now they seem to be. Isuzu, the GM affiliate that dominates the low-cabover market, says the Class 3-5 LCF segment is up by 17 percent over last year. Isuzu has lost some market share, from 50 percent to 41 percent, but is still selling more trucks.
As we said, the bigger numbers are in conventionals, and Hino's experience verifies this. Sales of its relatively new conventional-cab models are up 50 percent over last year, which had already zoomed after the domestically assembled conventionals replaced imported low cabovers in North America. Most of Hino's growth is in Class 6 and 7, because the builder says its Class 4 and 5 models are too premium in nature and price to go head-to-head against Ford and GM. In any case, production at Hino's Long Beach, Calif., assembly plant, as well as another in suburban Toronto, Ont., are going full blast, and more capacity is needed. A new plant will almost certainly be built, probably in the eastern or southeastern U.S.
And product competition among the big boys is getting stiffer. Both Ford and General Motors are about to announce new conventional-cab light-medium models. Ford says its current SuperDuty conventional line will see major changes by year's end, and scheduled an unveiling of the updated SuperDuties for late September – too late for this issue's deadline. GM, which just introduced its next-generation Chevrolet Silverado/GMC Sierra 1500 pickups, says those GMT900 cab and hood designs will appear on 2500 and 3500 pickups in a few months. Advanced frame and suspension setups are also likely on the heavier trucks.
Ford says prices of its '07 SuperDuty trucks have not been increased over those of '06s (while a typical '07 F-150 is priced about $1,000 less than an '06). And there'll be buying incentives for current models as build-out proceeds toward the end of the year and the new SuperDuties come on line. The powertrain warranty remains at five years/100,000 miles, but the $100 deductible has been eliminated. GM just matched that powertrain warranty for all 2007 cars and light trucks, to five years/100,000 miles/no deductible, saying it's doable because higher product quality has resulted in 40 percent fewer warranty claims over the last five years.
Still, the piper must be paid. The piper is the U.S. Environmental Protection Agency and its stiffer exhaust limits for diesels built after Jan. 1. New cleaner-burning diesels and their associated aftertreatment devices cost engine and truck builders hundreds of millions of dollars to develop and will be more expensive to make. These costs will be passed on to buyers. Manufacturers' announced price hikes range from about $1,500 to $5,000 for a typical light- and light-medium truck.
This means the price disparity between a gasoline- and diesel-powered light- and light-medium truck will rise, from a few thousand dollars now to $6,000 to $7,000, Isuzu estimates. For an operation where the truck runs under 30,000 miles a year, gasoline will make more sense, even with a diesel's greater fuel economy. Will buyers see it that way? We'll find out after January.
And then there are commodity prices. Costs for platinum and other precious metals that go into exhaust aftertreatment devices are high, and prices for basic metals such as steel, aluminum and copper have risen in recent years. These, too, are responsible for hikes in list prices and imposition of materials surcharges.
But if you buy trucks, you already know that.
