Remember the build up to the housing market crash in 2007 and 2008? Only a few people saw it coming, while everyone else wrote off the impending doom as an impossible occurrence. Most analysts felt the housing market was simply too big and too strong to fail, but here we are a good eight years later still trying to pick up the pieces.
The next crash won’t be nearly as large in scale and certainly won’t impact the economy of the United States, but it could bring down at least one automaker, put the hurt on thousands of car dealers, and potentially change the landscape of vehicle production in this country.
I’m talking about the death of the pickup.
The pickup market is booming right now. In fact, sales are up 7 percent for the year and the average transaction price is over $41,000. Trucks are a major profit source for automakers in the U.S. and all of them have plans to ramp up production to try and cash in while the market is hot. Fiat Chrysler Automobiles even plans to end production of the Dodge Dart and Chrysler 200 in favor of building more trucks.
The problem, though, is that these companies may increase production just as the demand for trucks is peaking.
An AutoWeek article said that analysts,
point to the slowing growth of the overall market and additional downside risk from weakening demand in Texas and other oil- and gas-producing regions.
What that means, of course, is there could be a massive oversupply of Ram 1500s and Ford F-150s on dealer lots in the near future. If demand weakens, prices will drop and dealers will be left taking losses while automakers scramble to add profit-cutting incentives to clear out the extra inventory. It would also mean decreased production, which could translate to a loss of jobs since many automakers are sending production of smaller vehicles to Mexico to make room for the production of trucks at home.
GM and Ford, in my opinion, could weather a downturn in truck sales. FCA, though, could suffer serious consequences because the company has invested so heavily in the Ram and Jeep brands while nearly abandoning the small car market.
People will always need trucks and there will always be a market for the rigs that can haul tons of hay and tow heavy boats. That’s a niche that will never go away.
The days of people buying trucks for fun could be about to end, however, unless they simply migrate over to a new breed of pickup, such as the well-reviewed and innovative 2017 Honda Ridgeline.
Why did you decide to buy your pickup? Could you see yourself moving to a different vehicle instead?