Trucks are proving to the be the backbone of the vehicle market, as manufacturers rely on pickups, crossover SUVs and even minivans to deliver higher transaction prices and profits. But the increased reliance on these non-cars to keep the ball rolling may lead to bigger incentives as a result of overcapacity in a cooling market.
Already we’ve seen Ford idle temporarily some F-150 pickup and compact SUV production for Escape and Lincoln MKC to adjust inventories. Still, trucks continue to march up market. Kelley Blue Book pegs the average transaction price for pickup trucks at $46,738 compared to a $33,958 ATP for all light vehicles. The current average for pickups is up 33 percent since 2010 and outstrips overall transaction price growth by a three-to-one margin.
Those hefty margins are seductive. All manufacturers are ramping up pickup and crossover production, while others, like Fiat Chrysler Automobiles, are dropping traditional sedans like the Dodge Dart and Chrysler 200 from their product portfolios to make room for more truck capacity. But industry sources are beginning to detect a build-up in inventories, especially among full-size pickups. WardsAuto estimates that the supply of these vehicles grew by 11 percent in September.
Already we are seeing significant incentives on 2017 model year trucks. Ram is offering up to $2,500 on its 1500 half-ton models, while Ford has a $1,250 rebate on the F-150. GM has rebates of up to $1,500 on its Chevy Silverado and GMC Sierra models. With these higher transaction prices and margins, there’s still plenty of room for the offers to be more generous, which may happen if October sales slip as some analysts predict.
Mercedes pickup bows
One maker that may want a piece of the U.S. pickup market is Mercedes-Benz, which just introduced its new X-Class crew cab pickup in concept form. This midsize truck is intended for sale in South Africa, Australia and Latin America as early as next year. Mercedes said it expects to decide soon whether or not to add the U.S. to list.
The vehicle was developed in conjunction with Nissan Renault. The X-Class platform comes from the Nissan NP300/Navara and the Renault Alaskan, the latter which was revealed recently at the Paris Motor Show. The companies already share engines, a 2.0-liter turbocharged 4-cylinder built by Nissan in Tennessee, and platforms, the Mercedes GLA and Infiniti QX30 use the same architecture.
Also: Class of 2017 – New Cars Ready to Roll
VW diesel settlement approved
Even though there isn’t a definitive fix announced for emission non-compliant Volkswagen models equipped with diesel engines, a federal judge has given final approval to the German automaker’s claim settlement with the Environmental Protection Agency and the state of California. VW had equipped its diesel models with software that would allow them to defeat emission control tests by running cleaner during the cycle and then reverting to a mode that had higher emissions as well as better performance and fuel economy.
The approval by Judge Charles Breyer is for vehicles equipped with VW’s 2.0-liter 4-cylinder turbodiesel. “Final approval of the 2.0L TDI settlement is an important milestone in our journey to making things right in the United States, and we appreciate the efforts of all parties involved in this process,” said Hinrich J. Woebcken, president and chief executive of Volkswagen Group of America. Work continues on a similar agreement for owners of vehicles equipped with 3.0-liter V6 diesel engines.
The agreement paves the way for buybacks or lease terminations as well as compensation beginning in mid-November. Owners can opt for a fix if and when it becomes available. In addition to these buybacks and payments, VW will put $2.7 billion into an environmental trust to remediate the excess NOx emissions as well as investing an additional $2 billion to help develop electric vehicle recharging infrastructure in the U.S. The settlement covers 2013-2015 Beetle, 2010-2015 Golf, 2009-2015 Jetta, 2012-2015 Passat and 2010-2013 and 2015 Audi A3 models equipped with the 2.0-liter TDI turbodiesel.
Nissan offers hurricane discounts
Victims of Hurricane Matthew are eligible for discounts from Nissan North America that include employee-pricing on most of the Japanese automaker’s cars and trucks. The offer is being made to consumers affected by the storm in Florida, Georgia, South Carolina, North Carolina and Virginia. The offer is valid only through Oct. 31.
Participants must furnish proof of vehicle damage or total loss with a limit of one claim per damaged vehicle. If three vehicles are totaled, the customer is eligible for three replacements. Existing incentives can also be applied to the discounted price. Buyers who finance their new vehicles under the program through Nissan Motor Acceptance Corp. will also be eligible to delay payments up to three months.
Also: Kelley Blue Book Best Buy Awards of 2016
Americans rack up more miles
So far through August, the number of miles driven by American motorists is up 3.1 percent according to figures released by the U.S. Department of Transportation. That comes on top of a 3.5 percent increase in 2015. During the 2008 recession, miles actually dropped 3.6 percent, so the gains seem to indicate that the economy is back on track.
Tom Webb, an economist with Kelley Blue Book parent Cox Automotive, refers to this data as a way of measuring “vehicle consumption.” More miles mean more wear and tear and eventually that requires a replacement in the form of a new vehicle. With the average age of the vehicles current in the fleet reaching 11 years, manufacturers are counting on high usage rates to spur turnover in the car market which will keep sales robust. Certainly fuel costs, which currently average 2.25 per gallon nationally for regular, is an incentive for U.S. drivers to keep on trucking.
The rundown
Check out the This Week in Car Buying Podcast here.
It’s time to say goodbye to our long-term 2016 Acura MDX. Read more about our experiences in this Long-Term Wrap up.
If you’re in the market for a high performance hatchback, give the 2017 Ford Focus RS some consideration. Our First Review details how this 350-horsepower compact performs.
The 2017 Honda Clarity is about to the hit the market and the Japanese automaker is promising a range of 366 miles.
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