Are Compact Pickups an Endangered Species?

You’d expect rising demand for smaller pickup trucks in an era of high fuel prices. After all, when it comes to boosting fuel economy, smaller is better — right? 

Apparently not for the U.S. compact pickup market, which has seen sales plummet 66.8 percent in almost a decade, from 868,794 units in 2002 to 288,136 in 2011. And, 2012 year-to-date numbers don’t show any change in that downward trajectory (See Chart: “Compact Truck Segments”).

“You have automakers turned off by the compact truck segment right now,” said Ivan Drury, senior analyst for Edmunds.com. “They’re asking themselves, ‘How much money are we going to have to spend in a dying segment?’ They look at the full-size trucks in their lineup, selling thousands upon thousands every single month. The way the market is declining, it’s hard to justify pouring more money into it.”

With once perennial small truck bestsellers Ford Ranger and Dodge Dakota recently put out to pasture in the U.S. market and with no near-term replacements in sight, this once robust segment is teetering on the brink of extinction. This trend has substantial implications for fleets that operate compact pickups because it directly impacts resale values and vehicle availability.

Drivers of Decline

What has caused such a precipitous drop in compact truck sales? Here are four key drivers of decline, according to the experts.

1. Aging platforms. Compact truck platforms have been allowed to become outdated, requiring high costs to retool and justify remaining in the market. “Some of these platforms are finally getting a major overhaul by OEMs — but for the global market. Automakers seem to be reluctant to proceed with testing and approval for the U.S. market,” said Rob Baran, department head, vehicle acquisition services, ARI – Automotive Resources International. 
2. Diminishing price gap between compact and full-size trucks. “With the incentives manufacturers are offering on full-size trucks, fleets could get a full-size pickup for the same or less cost than a compact,” Baran said. Drury agreed. “If the price is close, I’ll just go with the larger, more capable trucks,” he said. 
3. Newer engine options in full-size pickups offer comparable fuel efficiency. For example, the full-size 2012 Ford F-150 with the 3.5L V-6 EcoBoost engine offers a 2-mpg advantage over a 4.0L V-6 equipped 2011 Ford Ranger, 22 mpg versus 20 mpg respectively on the highway.
4. Expanded number of non-truck options. The rise of affordable and fuel-efficient compact vans, such as Ford’s Transit Connect, and car-based crossover vehicles have been taking market share away from the small pickups, offering both fleet and retail customers more options for applications that were once served exclusively by the compact pickup.

Peering into the Crystal Ball

What does the future hold for the compact pickup market? Will the segment rebound or continue its decline? The industry experts peered into their crystal ball to discover some potential answers. 

Rick Shick, vice president of vehicle acquisition and strategic services for Donlen, sees fleets doing what they’ve always done when the market changes: adapt to the change. 

“I believe the compact pickup market will continue to shrink and customers will find alternative vehicles to support their business needs, whether it be a Ford Transit Connect-type alternative, a full-size pickup, or some other alternative,” Shick said. “I do not see the market rebounding unless there is a dramatic change in retail demand, which I do not foresee. The price point and fuel savings between the compact and full-size pickup would have to be substantial enough to warrant considering the compact truck for a retail buyer.”

Baran of ARI believes the ball is squarely in the OEMs’ court. They will ultimately determine if the compact pickup will be making its final drive into the sunset.

“The future of the compact pickup, as it pertains to fleet, hinges entirely on the truck OEMs and what they are willing to bring to the North American market. With CAFE requirements and increasing demand for fuel-efficient company vehicles, we see a need for these vehicles both for the OEMs and for fleet customers,” Baran said, noting there still is a place for compact pickups in fleet applications.

“Although we have had many customers that were able to utilize car-based hatchbacks to accommodate certain job functions, in some cases, they were forced to start utilizing 1/2-ton pickups to haul larger cargo and heavier loads. Another consideration is fleets that must operate in metropolitan areas but cannot use a passenger vehicle or SUV for their needs. A compact pickup, in size alone, has a unique advantage over its full-size competition,” Baran said. “We believe that if the OEMs offer fuel-

efficient compact pickups that have similar payload and cargo capacity to the Ranger and Colorado, there will be a healthy fleet demand for these vehicles.”

The Bottom Line

Some fleet applications, such as pest control, tend to favor the compact pickup because of its maneuverability and capability to keep harmful chemicals outside the cab of the truck. Regardless of plummeting retail demand, fleets that operate compact trucks are experiencing the overall best retention values in this segment as of press time.

For instance, according to Black Book, the Ford Ranger saw a value increase of $350 for the MY-2009 models and as much as $725 for the MY-2008 models from the end of May. Long term, fleets who want to continue operating with a compact pickup vehicle may have to consider alternative OEMs who are still building small trucks or different vehicle types­ — such as vans or crossovers.