What’s Up Wednesday 9/4/19

Startups Disrupt American Truck Sales?

It’s rare to see disruption in the auto industry happening in real-time.  That is indeed what seems to be taking place.  Not only are consumer tastes and preferences in the types of vehicles they seek changing to favor larger, truck-based machines, for the staid automotive industry there is also the perpetual threat of startups entering their space with lineups of electric powered SUVs and pickup trucks.

Ford recently announced that the company will no longer be selling automobiles here (other than the Mustang which continues to be a hot seller in the U.S.), instead focusing all of its efforts in the American market on SUVs and trucks.  The Ford F-Series is the top-selling vehicle line in the United States.  For the 2nd quarter of 2019, the Ford F-Series sold 233,787 vehicles.  The closest two product lines in terms of United States sales were the Dodge Ram (179,454 units) and the Chevrolet Silverado (142,463 units).  Large American manufacturers, while they are struggling to sell traditional automobiles, apparently excel when it comes to pickup trucks and SUVs.

Thus, given that traditional manufacturers like Ford, GM, and Fiat Chrysler are relying heavily on pickup trucks and SUVs to drive profits, what type of threat do startups Rivian and Tesla pose?  While most people on the street know about Tesla, Rivian (which has yet to place a vehicle on the market) remains an intriguing mystery (it’s got a hefty reputation within the automotive community but at the moment not much else).

This means that it’s difficult to gauge the potential market disruption that may ensue (if these companies can truly release a high volume of appealing pickups and SUVs).  Tesla has a small SUV, the Model Y, ready to manufacture.  The Model Y is based on the Model 3 platform, and is scheduled for release in 2020.  This will be Tesla’s first real test in the high-volume SUV market (discounting the gullwing-doored Model X which is a luxury vehicle ($81,000 base priced))  The Model X is probably too costly to achieve huge mainstream sales.

Taking sales from the bread and butter of the traditional “Big Three” automakers is the bigger question for startups like Rivian and impudent intruders like Tesla.  Those pickup trucks dominate sales here in the US and we have yet to determine if Tesla and Rivian can obtain a meaningful share of this market.  The Rivian electric pickup is scheduled to begin production sometime in 2020, making it ready for the 2021 model year (we’ll see how the U.S. economy is then; it doesn’t promise to be good and for a product like the Rivian, timing can be everything).  Ford Motor Company, for one, has placed a sizeable investment in Rivian ($500 million to date).  Clearly, Ford sees electric trucks, pickups and SUVs, as a real alternative to the internal-combustion engine vehicles it currently sells.  There are even rumors that Ford will release its own electric F-Series pickup in the near future.  In fact, Ford’s offering may beat the Tesla pickup truck to market.

Speaking of Tesla and pickup trucks, the company is scheduled to debut its pickup design to the public, perhaps as early as this month (September of 2019).  Elon has claimed his will be a superior truck to the equivalent Ford F-Series and, at the same time, will offer better performance than a Porsche 911.  That’s quite an eye opening (even crazy) claim on the surface.  In all honesty, it seems farfetched.  However If this Tesla pickup comes even close to Elon’s boast, it should sell well at its competitive target price ($50,000 entry level).

To take market share from the Big Three, both pickups, the Tesla and the Rivian, must perform adequately if not better at the tasks traditional that trucks were designed to undertake.  They cannot just look the part and perform poorly.  How well do they are able to do truck-related things – towing, hauling, off-roading, etc?  The jury remains out and only real-world testing will prove or disprove the usefulness of these pickups.

Whether these first-generation electric pickups from these startups disrupt the industry has yet to be determined, but on paper there’s no reason to believe that either pickup can’t succeed.  It could be that these startups take a bite out of what’s been a steady and reliable (well-established) industry.  This may even reach a global scale.

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