With consumer preference shifting to larger vehicles and trucks typically the most profitable models in the lineup for established automakers, analysts say the move to develop electric trucks was almost a given.
“Electric pickups make sense for a number of reasons,” Morgan Stanley analyst Adam Jonas wrote in a note on Wednesday. He highlighted the benefits of high torque for towing and hauling, the ability to charge electric tools and a higher price point allow companies to pass on bigger costs. Jonas estimates that the full-sized pickup truck segment accounts for well over 100 percent of global automotive profit for GM and Ford Motor Co., and the majority of Fiat Chrysler Automobiles NV’s global profit.
GM, Amazon and Rivian have yet to confirm the talks, even as the idea found support in Wall Street. “While we believe electric vehicle pickups are not the near-term future for GM (demand isn’t there at a profitable price point), it is their long-term future,” Evercore ISI analyst Arndt Ellinghorst wrote in a note.
Earlier this week, Jonas had flagged Rivian as potential serious competition for Tesla Inc., which is expected to unveil an all-electric pickup truck as soon as this summer.
These should be boom times for Detroit. Unemployment is at a half-century low, gasoline is cheap and auto sales in the U.S. were near record levels last year. Yet American automakers are closing factories, cutting shifts and laying off thousands of workers. The industry is behaving like a recession has arrived.
In one segment of the market, it has.
Detroit is in the grips of a car recession marked by the collapse of demand for traditional sedans, which accounted for half the market just six years ago. Buyers have made a mass exodus out of classic family cars and into sport utility vehicles. Familiar sedan models such as the Honda Accord and the Ford Fusion made up a record low 30 percent of U.S. sales in 2018, and things will only get worse.
Sales of the passenger-car body style that’s dominated the industry since the Model T will sink to 21.5 percent of the U.S. market by 2025, according to researchers at LMC Automotive, relegating sedans to fringe products. That leaves automakers with excess factory capacity that can turn out about 3 million more vehicles than buyers want. And overcapacity is precisely what spurred losses the last time a recession wracked the industry.
“You could classify this as a car recession,” said Jeff Schuster, senior vice president of forecasting at LMC Automotive.
