The big market for little trucks

Nation's Business, Oct, 1984 by Bob Gatty

THE COMPACT PICKUP is one of the great success stories in today's American motor vehicle market, and a fierce struggle is under way for shares in that success.

Seven years ago, only 0.4 percent of pickup truck sales went to compacts--trucks with a wheelbase of 103 to 105 inches. Last year the figure was 39 percent.

Japanese manufacturers have a big chunk of the compact pickup market--Toyota is No. 1 in sales--but U.S. manufacturers are battling to displace them. As 1985 models hit the showrooms, manufacturers will be rolling out heavy promotions and incentives to customers.

Toyota held a 20.3 percent share of the U.S. market for small pickups in the first six months of this year. Ford Ranger was next with 19.5 percent; Nissan was close behind at 19.1. Others ranked as follows: Chevrolet S-10, 17.5; Mazda, 10.2; GMC S-15, 3.9; Dodge Ram 50, 3.8; Isuzu, 3.1; Mitsubishi, 1 percent; Dodge Rampage, 0.9 percent; Subaru Brat, 0.4 percent and Jeep Scrambler, 0.3 percent.

One reason Toyota has been doing so well, says a spokeman at Toyota Motor Sales USA in Torrance, Calif., is that the Japanese company pays close attention to the desires of specific groups of American customers.

For example, the spokesman says, Toyota is the only manufacturer to offer a four-wheel drive vehicle with a solid front axle--which provides extra stability not found in independent front suspensions.

The four-wheel drive market "is very hot," the spokesman says, because of the popularity of recreational off-the-road driving among campers and others, "and a solid front axle is what off-roaders look for."

Pricing helps Toyota hold on to its market share, the spokesman says. "Our base price is $5,998, and it hasn't changed in three years," he says. "The competitive forces keep the price down. It's very competitive out there."

He notes that Toyota is able to meet the price competition in the United States even though a 25 percent tariff is imposed on imported light trucks from Japan--and even though the domestic manufacturers are using state-of-the-art manufacturing techniques, just as in Japan.

A spokesman for Nissan Motor Corporation USA, says Nissan, too, tries to stay on top of the U.S. market and to provide the design and features specifically sought by small truck enthusiasts. For example, Nissan was losing sales because its truck did not have a double wall bed.

"We decided to add that so we can be competitive in the marketplace," the spokesman says.

NISSAN OFFERED an 8.8 percent financing deal to customers instead of giving a negotiated discount or a rebate. The spokesman says the incentive program was "highly successful. We were able to hit our sales objectives as a result."

In fact, he notes that after the deal was dropped, Nissan's small truck market share dropped from 19.1 percent in June to 18.3 percent in July.

The company produces about 56 percent of its vehicles sold in the United States at a plant in Smyrna, Tenn., that opened in June, 1983. The first month, the plant produced 130 trucks. Today the monthly average is 8,000.

For two years, in 1982 and 1983, U.S. manufacturers were able to cut into imports' share of the market. But that has not happened this year, when a total of about 1.1 million compact pickup trucks are expected to be sold, up 19 percent over last year's 924,000 units and more than twice the 503,000 delivered in 1981.

American-made trucks are expected to account for slightly more than half the 1984 total, but that includes Nissan's trucks produced in Tennessee. Without the Nissans, the domestic share would be about 46 percent, down from 50 percent in 1983.

When General Motors introduced the Chevrolet S-10 and the GMC S-15 late in 1981 and Ford its Ranger pickup in March, 1982, the compact truck market in the United States belonged to the Japanese--they had 88.2 percent of the market in 1981. The imports' share dropped swiftly to 50.1 percent after the American vehicles became available.

The Japanese companies' pricing and marketing strategies are credited by U.S. manufacturers as basic to their success. They point to tax practices in Japan and to the low value of the Japanese yen compared with the U.S. dollar as primary reasons for their ability to compete on price despite the 25 percent tariff.

Although the small pickup market is led by the Japanese, they are just beginning to make inroads in the larger commercial truck category.

Hino, which has a working relationship with toyota in Japan, markets commercial light and medium duty vehicles in the United States. Isuzu Trucks of America has just begun marketing a new delivery vehicle in 18 states to compete with the Chevrolet G30 and the Ford E350.

"There is a niche for us in this market," says an Isuzu spokesman. "We are developing a dealer network and I'm being inundated with people who want to be involved. A lot of people are saying, 'I don't want to miss the next Honda.'" That popular Japanese import spawned many successful dealerships.

Two parts depots have been established by Isuzu to provide service support in the United States, says the spokesman.