'It's a war' — Detroit automakers battle for dominance in wildly profitable heavy duty truck market

Key Points
  • There's an all-out war for the heavy duty truck market where pickups can cost $100,000 or more.
  • Truck owners, both professional contractors and recreational drivers, want serious towing capacity.
  • The newly redesigned Sierra HD pickup, unveiled by GMC at the San Diego waterfront last month pulled a yacht and life boat weighing 225,000 pounds.
GMC's 2020 Sierra Denali HD pickup truck
Paul Eisenstein | CNBC

Buyers with money to burn can find plenty of upscale products at this week's Chicago Auto Show, the event filling the Windy City's McCormick Place convention center with offerings like the Maserati Levante, BMW 745i and Mercedes-Benz S-Class.

But more than a few high-line buyers are looking in places you might not expect — like the more plebian Ford stand.

Among the mainstream-priced Fusion sedans and Edge utility vehicles, Ford is also showing off the latest version of its Super Duty pickups. That includes the Limited model that, when fully loaded, can nudge up to around $100,000, the first factory pickup to break into six-figure territory.

Ford F-150

Ford's F-Series line-up — which includes a mix of light to heavy-duty models — is the country's best-selling nameplate, with General Motors' Chevrolet Sierra and Fiat Chrysler's Ram pickups close behind. They're also among the industry's most profitable products, according to industry analysts, Ford last month noted that sales of the F-Series offset the automaker's overseas losses during the fourth quarter.

While pickups, in general, deliver substantial profit margins, it's the heavy-duty models that really give a lift to the bottom line. Data from J.D. Power and Associates puts the average price at $44,000, though well-loaded models routinely climb to as much as twice that.

A Ford Motor Co. F-150 Raptor pick up truck stands on display at the Auto Shanghai 2017 vehicle show in Shanghai, China.
Qilai Shen | Bloomberg | Getty Images

Analyst George Peterson, head of AutoPacific, Inc., notes that profits on models like the Ford Super Duty Limited can push "well into five figures."

It's no wonder, then, that all three of the domestic manufacturers are putting so much emphasis on the Heavy Duty versions of their full-size pickup lines. That includes all-new 2020 HD models, short for heavy duty, from both GM and Ram, as well as a major update of the Ford models.

Bullish on trucks

General Motor's GMC brand jumped into the fray last month with an all-new version of its Sierra truck. Sibling Chevy followed last week with the Silverado HD unveiled to the public at the Chicago Auto Show.

"We are so bullish about (these) trucks this year (that) we predicted stronger than expected earnings for 2019," GM President Mark Reuss said during a sneak peek presentation for journalists at the Flint, Michigan plant building both Sierra and Silverado HD models.

General Motors President Mark Reuss introduces the Chevrolet 2020 Silverado HD pickup truck at the GM Flint Assembly Plant in Flint, Michigan, February 5, 2019.
Rebecca Cook | Reuters

The Detroit automaker has invested $1.5 billion in the Flint plant in recent years, much of that to boost overall capacity — which also includes light and medium-duty trucks — by about 25 percent, said factory manager Michael Perez.

A war

Overall, American buyers purchased 2.7 million full-size pickups last year. Heavy-duty versions accounted for 660,000 of those, according to data from IHS Markit. That was down a little less than 3 percent from 2017, in part due to the phase-out of outgoing models. The research firm anticipates sales will get off to a slow start this year due to factory changeovers but then gain momentum as production picks up. It forecasts sales of around 656,000 for all of 2019.

The problem is that GM isn't the only HD truck maker looking to increase its sales. And that, said analyst Peterson, is triggering "a war" for market dominance.

The challenge for manufacturers is figuring out what buyers want. That's not as easy as it might seem, as the average heavy-duty buyer has changed over the past several decades. Where they once were largely made up of commercial users — contractors, delivery services and builders, for example — non-commercial buyers now make up two-thirds of the market, according to Duncan Aldred, the vice president of the GMC brand.

2019 GMC Sierra SLT truck is unveiled during an event at Russell Industrial Complex in Detroit, Michigan, on Thursday, March 1, 2018.
Jeff Kowalsky | Bloomberg | Getty Images

Towing is priority

Yet, these buyers all appear to have several things in common. They want their trucks to look bold and aggressive but the "absolute, number one priority is towing," said Jaclyn McQuaid, the chief engineer for both of GM's HD models. The 2020 Chevrolet Silverado 3500 HD version, equipped with a diesel V-8, has a maximum towing capacity of 35,500 pounds, a 52 percent increase from the outgoing model.

At its own preview of the Sierra Denali HD last month, GMC unveiled the truck at the San Diego waterfront where the dually, outfitted with a diesel engine, pulled a yacht and life boat weighing 225,000 pounds. Officials said they made no modifications to the truck other than to the tow hitch itself.

Fiat Chrysler's new HD line adds an updated Cummins diesel engine that is the first ever to top 1,000 pound-feet of torque. It only narrowly falls short of the GM HD models when it comes to a towing capacity of 35,100 pounds. But it also can haul 6,570 pounds of cargo in its bed.

Upscale accoutrements

While function wins out over form, HD buyers do have some things in common with buyers of light-duty trucks and, indeed, luxury car buyers. They're increasingly interested in upscale accoutrements, such as the heated, cooled and massaging leather seats found in the Ford Super Duty Limited.

A Ford Motor Co. F-150 Raptor pick up truck stands on display at the Auto Shanghai 2017 vehicle show in Shanghai, China.
Qilai Shen | Bloomberg | Getty Images

While GM isn't pushing quite as far up-market as Ford, it is adding new, high-line versions of its HD trucks, including the Silverado High Country, and the GMC Sierra Denali. The carmaker has not yet revealed pricing, but Chevy's High Country is expected to top out somewhere in the $80,000 range, a source at the division told CNBC, while the Sierra Denali should come even closer to the Ford Limited.

Heavy duty buyers also want more technology, including better infotainment systems. But, again, the focus is on functionality.

The Chevrolet Silverado and GMC Sierra both add new camera systems for 2020 that help a driver get a better view of the world around the vehicle. Among up to 15 different possible views, the Transparent Trailer feature lets the driver see the road behind a boat or RV as if it were invisible.

The 2019 Ram Heavy Duty pickup truck unveiled at the Detroit auto show on Monday, Jan. 14, 2019.
Mack Hogan/CNBC

High tech adds

Ford is countering with its Pro Trailer Backup Assist system. It also uses a camera to let the driver see behind the truck, but it adds a small dial on the instrument panel that can be used to point where the trailer has to go. Then the Super Duty will steer itself into the correct spot, such as a boat ramp or loading dock.

"The manufacturers are getting good at taking their tech from their pass(enger) car segments and applying to the HD truck segment, but not doing it in a gimmicky way," said IHS principle auto analyst Stephanie Brinley. It shows they truly know these customers."

How much these updates will matter is uncertain, Brinley said. "It's a segment that's extremely brand loyal," though she added that "The best way to win over buyers is with new features."

Halo trucks

Beyond shoring up the bottom line of their respective manufacturers, these HD trucks serve another purpose: putting a halo around their individual brands, especially the light-duty trucks they offer. And that has proven critical.

A 2019 Toyota Motor Corp. Tundra TRD Pro pickup truck sits on display during the Chicago Auto Show in Chicago.
Daniel Acker | Bloomberg | Getty Images

The pickup market is now the only place where Detroit's so-called Big Three can still claim dominance, outselling their two import rivals by over to-to-one last year. Ford alone sold 909,330 full-size pickups in the U.S. in 2018, while Toyota moved just 118,258 of its Tundra trucks. Nissan's Titan lagged even further behind, with sales of just 50,459.

Nissan does sell a medium-duty version of the Titan, but it's barely an asterisk on the sales charts. Neither import offers a heavy-duty model.

And that's the way Detroit's automakers hope it will stay. Without pressure from the imports they can maintain hefty prices and the big margins that keep their balance sheets in the black.

A Nissan Motor assembly worker gives a Nissan Titan its final inspection at the Nissan North America assembly plant in Canton, Mississippi.
Mark Elias | Bloomberg | Getty Images