America is a truck society.
You see it in the way we transport our goods — 70 percent of freight travels by truck.
You see it in the way we drive — almost 60 percent of the light vehicles sold in the U.S. during the first 10 months of this year are technically classified as trucks. That includes traditional pickup trucks such as the Ford F-150, vans, sport utility vehicles, compact utility vehicles and even Tesla’s electric Model X.
Pickup trucks alone accounted for 15.2 percent of the 14.5 million vehicles that Americans have purchased so far this year, according to Autodata Corp., an industry research firm.
Cheap gasoline combined with big leaps in fuel economy for these larger vehicles make light truck purchases palatable for consumers even though they are typically more expensive than passenger cars. Drivers gravitate to the vehicles because they like the room, cargo space and general feeling of viewing traffic from high above the road.
As they see passenger car sales decline, big domestic brands are capitalizing on this trend. They are increasing truck and SUV production in the U.S. and shifting passenger car manufacturing to Mexico and other markets. Passenger car sales fell 15 percent last month and are off 9 percent for the first 10 months of this year compared with the same period in 2015. Meanwhile, truck sales have risen 7 percent so far this year.
Karl Brauer, senior analyst for car shopping website Kelley Blue Book, looked at the industry’s September and year-to-date sales results issued this week and had this stark observation.
The truck-centric sales pattern, Brauer said, is “putting a big question mark over the wisdom of any and all future car development.”
While it’s pretty obvious to anyone who has driven on an interstate — contending with all the big rigs — why over-the-road trucking makes our economy work, the design, production and sales of light trucks in the U.S. also represents a huge contribution to the economy.
The Center for Automotive Research, an industry think tank in Ann Arbor, Mich., documented America’s truck-centric leanings in a research report this week.
Nearly 2 out of every 3 vehicles manufactured last year in the U.S. by all automakers — regardless of whether they are headquartered in the U.S. or abroad — were classified as light trucks, according to CAR.
More than 155,000 U.S. workers are employed making light trucks as well as engines and transmissions used by light trucks at manufacturers as diverse as BMW, Mercedes-Benz, Fiat Chrysler Automobiles, Ford, General Motors, Honda, Hyundai, Kia, Nissan, Subaru, Tesla, and Toyota, according to the report.
“Not only is U.S. light vehicle production heavily concentrated in pickups, vans, SUVs and CUVs, but these production activities have an even greater effect on the U.S. economy than passenger car production since many light trucks are designed and manufactured solely for the North American market,” CAR said.
The researchers said that vehicles classified as light trucks averaged 48 percent U.S. and Canadian parts and content, six full percentage points greater than the 42 percent average for passenger cars. Vehicles defined by the classic definition of a truck — those in which the body is bolted onto the frame — have an average 57 percent U.S. and Canadian parts and content.
This business provides huge economic benefits.
The production of full-frame light trucks in the U.S. has a combined total direct employment of 84,200, CAR said. The research group estimates that every job in a U.S. factory producing body-on-frame trucks, related engines and transmissions supports another 14.9 jobs. In total, U.S. body-on-frame light truck production produces $71.9 billion in private disposable income, CAR calculated.
Truck building is a critical component of the economies of Indiana, Kentucky, Michigan, Mississippi, Missouri and Texas, the states where most of the vehicles are made.
Moreover, light truck sales make up the underpinnings for much of the U.S. auto industry by generating corporate profits and funding research and development for all types of vehicles.
“On a per-vehicle level, every incremental unit of light truck sales brings in an average of $6,000 in profits for Ford and GM across the entire light truck segment. This per-vehicle estimate includes large SUVs and pickup trucks that are among the most profitable vehicles sold in the United States; profits on pickup trucks can be as high as $13,000,” CAR said.
This is especially important for domestic brands. Nearly 72 percent of the Detroit Three automakers’ U.S. sales in 2015 were pickup trucks, vans, SUVs and CUVs, CAR said.
This all has important policy implications because “light truck sales and production are essential to U.S. automotive assembly and parts supplier employment, the economies of the 13 states and numerous communities that host truck assembly and supplier plants, and the financial health of the automakers,” CAR said.
Federal regulators are now reviewing the current targets for fuel efficiency and greenhouse gas standards. Meeting those targets will likely require costly technologies.
The government needs to be wary of increasingly strict mandates, especially when it comes to the body-on-frame trucks that are used for so many construction, utility and industrial jobs. CAR believes that because of the intense demands placed on the vehicles compared with passenger cars, “the added costs may be even more severe — or possibly require levels of performance degradation that consumers find unacceptable.”
Weaning the nation off fossil fuels and reducing greenhouse gas emissions are worthy goals. But the regulation of truck manufacturing must be carefully crafted because of the industry’s outsized effect on the economy. With so much at stake, policymakers need to be aware of the possibility of unintended consequences.