Fiat Chrysler (NYSE:FCAU)
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1 Month : From May 2019 to Jun 2019
By Adrienne Roberts and Mike Colias
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 20, 2019).
The growing popularity of Fiat Chrysler Automobiles NV's Ram pickup truck is pushing the car maker's Detroit rivals to defend their positions in a highly profitable corner of the auto market.
Ford Motor Co. and General Motors Co. have long occupied the top two spots selling large pickup trucks in the U.S. Ram lagged behind in third place, but has recently started gaining on its larger rivals by packing its latest trucks with new technology and more luxurious interiors. It also is attracting many first-time buyers with showroom rebates, dealers and analysts say.
Ram overtook its chief competitor, the Chevy Silverado, in full-size pickup truck sales for the first time in the first quarter of 2019, according to GM and Fiat Chrysler. Ram's full-size truck sales increased 7% last year to 537,000, while Chevy Silverado sales remained flat.
GM, which sold roughly 800,000 big pickups last year, still tops Fiat Chrysler in overall truck sales, because it sells a second full-size truck model, the GMC Sierra. Ford remains in the lead, selling about 900,000 big pickups last year.
"Ram has definitely stepped up their game particularly on the inside of the truck," said Sam Soroka, a 34-year-old account manager in Potomac, Md., who recently leased a new 2019 Ram 1500 truck. "It feels like I'm in a Mercedes."
Mr. Soroka said he hadn't been interested in a Ram until he saw his friend's 1500 pickup model last fall and decided to get his own. It is his first truck.
According to some analysts, Ram has taken the unusual step of offering substantial discounts on a brand-new truck, which could help entice loyal buyers to switch brands but also cuts into the company's profits on the vehicle.
"Ram is the most aggressive right now with rebates while GM has backed off in the first quarter," said Adam Kraushaar, president of Lester Glenn Auto Group, which sells GM, Ford and Fiat Chrysler vehicles in New Jersey.
For instance, Fiat Chrysler offered an average discount of $5,900 on its new Ram 1500 in the first quarter, compared with $5,000 that GM offered for the recently redesigned Chevy Silverado, according to data from Edmunds.com.
Large pickups are huge profit generators for the Detroit car makers, fueling the bulk of their global profits. Analysts estimate the companies make about $10,000 from each sale of a large pickup-truck.
Truck buyers tend to be fiercely loyal to one brand, making it a challenge for rivals to take market share. Ram has been able to lure buyers from competitors and attract first-timers with an interior that looks more like a luxury sport-utility vehicle than a work truck, analysts and buyers say.
Those gains are helping Ram's Italian-American parent company offset weaknesses in other brands and overseas. Ram was the only Fiat Chrysler brand to increase U.S. sales in the first quarter of 2019. Executives credited the brand's strong performance with counteracting otherwise poor sales in North America, where operating profit dropped 11%.
A redesigned Ram 1500 pickup that arrived in dealerships last year is helping. The brand's share of the full-size truck market climbed to 23% in the first quarter, up from 22% at the end of 2018 and 21% in 2017, according to company sales reports.
In contrast, GM's share of large pickup sales dropped to 30% in the first quarter this year, down from 33% at the end of last year, the company-provided data shows. Ford's share rose 3 percentage points to 41% in that same period, but analysts say it has had to deepen discounts on its top-selling F-150 truck to hold on.
Jim Morrison, Ram's chief in North America, said the company packed the new Ram truck with premium materials and technology, like an optional 12-inch touch-screen right control panel. "We were overcompensating for something, for sure," Mr. Morrison said in an interview. He declined to comment on Ram's truck discounts or competitors.
Some car reviewers have lauded the Ram's new interior, while panning the cabin of the Chevy Silverado as less posh.
GM President Mark Reuss said in an interview, "We know our customers love the interior of the truck. This is not over. We play for the long term."
Executives at GM have said they are prioritizing higher prices over simply boosting sales, which is why the company has held the line on discounts. The average price paid for new versions of GM's Chevy Silverado and GMC Sierra full-size pickups was about $48,000 in the first quarter, 20% higher than the price paid for older models sold a year earlier, the company has said.
Ford, meanwhile, has deepened discounts on its top-selling F-150, one of the oldest pickup trucks on the market, partly to fend off the competition, analysts say. Average company spending on sales incentives for that model was $6,300 in the first quarter, up from $5,800 last year and about $400 more than Fiat Chrysler's incentives for the Ram truck, according to Edmunds.com.
A Ford spokesman said Ford continues to widen its lead while Ram and Chevy battle for second place. Strong pickup-truck pricing helped power profits in the first quarter, Ford executives have said, and next year, the F-150 truck will get a redesign -- its first in six years.
Write to Adrienne Roberts at Adrienne.Roberts@wsj.com and Mike Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
May 20, 2019 02:47 ET (06:47 GMT)
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