Pickup trucks are second largest segment of theautomobile market today. Its market structure is clearly anoligopoly; the two biggest automobile companies in the UnitedStates dominate it today. Collectively these two companies producearound 70% of all pickup trucks sold in the United States. Thesetwo companies produce the two most popular vehicles in thissegment, and two of the best-selling vehicles in all segments ofthe automobile industry. While most people might be thinking sportutility vehicles or sedans, they are buying pickup trucks. Pickuptrucks currently make up 35% of the automobiles sold in the UnitedStates (Edsall 68). They also are the two best-selling vehicles inthe whole automotive industry (Edmund’s 1). It is clear theyare an important segment of the industry to consider.

Neither Ford nor General Motors has given updominance in this market in the 1990s, though DaimlerChrysler andToyota make up a significant percentage of trucks sold.DaimlerChrysler, especially in the past decade has made asignificant dent in Ford and General Motor’s sales with theDodge Ram 2002 and 1994 1/2 stylistic redesigns. They sold 344,538of the Dodge Ram in 2001 although that number has increased overthe past year with the 2002 redesign (Car Sales 1). The 2002stylistic design was so popular, even with the currentmacro-economic conditions, it’s sales increased almost 18%(YTD % 1/02-9/02) from last year (Sales Figures 1).

That market share is still insignificant compared toFord and General Motors; both companies have 36% of the market (1).This is not surprising, because Ford’s F-Series of full-sizetrucks are still is the best-selling vehicles out there, with911,597 sold in 2001 and a similar number sold in 2000. GeneralMotors is not far behind with the second best-selling vehicle inthe automobile industry, the Chevrolet Silverado selling 716,051vehicles (Riches 1).

Some pickup truck manufactures, such as Isuzu andMazda, are not actually separate models, but share a chassis andmuch of the same design due to Mazda being owned by Ford and Isuzubeing a General Motors partner (Muller 8). They also haveinsignificant market share. Therefore, for the purpose of thispaper we will ignore them. Additionally data on the Britishcorporation, Nissan was not included, as United States salesstatistics were unavailable.

Due to lack of companies competing in thisspecialized market, it is clear that it is an oligopoly. TheHerfindahl Index of this market reflects this, being almost 3,069(see pg. 9). That number is inflated slightly due to exclusion ofthe Nissan Frontier, as noted above. Price leadership and non-priceleadership such features and performance are very common, leadingto a strong standardization between models of the same class. Theyare generally fairly standardized, due to governmental regulationsand the need to be competitive (a heavy-duty truck with an I-4engine would not sell).

Can You Replace a Chevy with a Toyota?

Are pickup truck companies products standardized ordifferentiated? Clearly, a compact pickup is different from afull-size truck or a heavy-duty truck. Is their substantial enoughdifference between a Ford F-150 and Chevrolet Silverado that makestheir use non-interchangeable for specific uses and tastes? Avariety of sources were considered comparing safety, cost ofcollision repairs, price, gas mileage, and retail value forfour-door passenger cars and four-wheel drive pickup trucks(compact and full-size). Those are what a consumer would be mostlikely to consider; additionally they are directly comparable. Thedifferences in styling would not be quantifiable, nor would load orpower differences are able to compare to the passenger carmarket.

Data from the Highway Loss Data Institute showed that thestandard deviation of claims payments for injuries was 12.381 forfull size trucks and 11.074 for compact pickup trucks (Injury 4).This is far smaller then the standard deviation for mid-sized cars,which was 32.557 (2). While safety varied significantly less onpickups then mid-sized cars, it was clear they are much safer as athey are larger, with a average injury claim 45% lower thenmid-sized cars. This seems to indicate that their is quite a bit ofstandardization in safety equipment and design in trucks and crashworthiness, compared to cars (safety features have become popularin trucks as of the past decade. When it comes to deviations inrepair costs after accidents, mid-size cars and full-size pickuptrucks both had a statistically insignificant standard deviation of14.865 and 14.805. There was a far smaller deviation in repairingcompact pickup trucks, 8.960 (Injury 2-4). Damage costs to truckswas 22.5% less then mid-size cars. These numbers would seem toindicate that there is no significant difference in body durabilityin mid-size cars or pickup trucks.

Fuel economy is more challenging to compare for the deviationsbetween models. There is quite a bit of difference betweendifferent models, but it does not show up in statistics, becausethe EPA for fuel economy does not rate heavy-duty pickup trucks.Comparing only light-duty trucks (full-size or compact), there isquite a bit of difference in fuel economy, but it similar to thatof passenger cars, both have a deviation of around 1.68 miles pergallon (GreenerCars 1-6).

There is significant evidence of price leadership in settingbase prices for trucks. All four of the major brands, the baseprice for a full-size pickup truck is around $17,500. It has astandard deviation of around $250 between base models, which is notsignificant for a large investment as a motor vehicle (Full-sizePrices 1-3). Mid-size sedan variety a lot more in type, and it ishard to get an accurate comparison, but in general, the price for abase model can vary from $14,007 to $21,593. The standard deviationis far larger then trucks for the base price, it is almost $2,000(Midsize Prices 1-6). Most of that difference is due to thedifference between inexpensive Korean sedans and expensive Europeanand American sedans.

Differences exist between trucks that these numbers cannotquantify. It is not easy to measure styling and personalpreferences with numbers. Even if they could be, any such numberswould extremely subjective. Brands people purchase often reflectspersonal biases and tastes. This explains historical trends of Fordand GM’s dominance of the truck market for the past 20years.

The Decline of the Ford-GM Truck Empire

A consumer without specific needs could quite easilyfind a replacement, especially as foreign and domestic competitorsstart offering increasingly more options. Changes are thenorm in the auto industry, and less competitive businesses losemarket share. Forty years ago, General Motors dominated theAmerican automobile industry, producing more then 50% of all carssold in the United States (New Industry 3). Today that picture isfar different. General Motors makes fewer then 28.1% of allvehicles today, according to numbers in Business Week for May of2002 (3). Times change the type of vehicle that sells best, fromGeneral Motors’ Chevrolet Impala in 1960s to today, whereGeneral Motors and Ford pickup trucks dominate the list. Only oneother domestic maker’s vehicle that beats all other foreign isthe Ford Explorer. Foreign companies dominate passenger vehicles,taking 4th and 5th place of all vehicles sold. However, foreigncorporations have yet to become popular options for truck buyers(Riches 1).

Foreign auto makers see the truck market as being one thatwould like to be part of near future, with it’s high sales andprofits. They see the American market as a inefficient oligopolymarket, where prices and non-price competition is not competitivewith what they can offer. The domestic industry must eitherinnovate or die out (Monopolistic Competition 45; McConnell 505).Detroit has loss more then 7% of their market share of trucks,sport utility vehicles, and minivans since 1997. They now onlycontrol about 76.3% of this segment, according to Joann Muller inBusiness Week (Muller 5; Naughton 1). Over the past two years, theToyota Tundra has increased in market share by over 5% (Muller 8).Toyota’s sales of the Toyota Tundra reflect this trend,increasing 0.8% for their full-size trucks, which is an increaseversus the F-Series and Silverado’s losses (Sales Figures 1).However, the GMC Sierra and the Dodge Ram gained market share. Thismay mean consumers are not buying more Toyotas, but that people arebuying substitute or superior American models.

The All-American Foreign Truck:
Good for Truck Buyers; Bad for Workers

Increasingly, the foreign factories make automobiles in theUnited States. Foreign companies make almost 50% of their vehiclesin the United States, including the Toyota Tundra pickup truck (NewIndustry 1). Many companies, including the auto industry founditself merging significantly in the past few years. As notedearlier, this means that there is smaller competition in theautomobile industry. The pickup truck industry especially has feltthe market getting smaller, with American models being the base forforeign automakers' trucks.

What does this all mean for the average American? If they arelooking for a job involving the manufacture of automobiles, theywill find that foreign companies are paying far less, and offeringfewer benefits then American carmakers. Most foreign 'transplant'factories are free of unions, unlike the Big Three's factories. Aperson working for a big three for about 2 years can expect to earnaround $52,000 a year, along with a variety of fringe benefits. Anexample is a person who works in Honda’s Alabama plant makesonly about $43,680 a year (Muller 7). As Sean P. McAlinden of theCenter for Automotive Research says, "they wouldn’t even pay$12 to $13 an hour" if they were not competing for workers withother unionized plants (8). It is not clear if United Auto Workerscan continue with all it’s clout in the domestic market, sinceits membership has declined over 60% since the late 1970s (9).

While the American automobile worker may not be winning, it isclear that the consumer is. For the next three years, according toMerrill Lynch and Company, there will be an average of 50 newvehicles introduced every year, about five of them variations onpickup trucks design. Redesigned and improved will be the norm. Nowstandardized are safety features such as anti-lock brakes andside-airbags even on vehicles not historically known for safetylike trucks. Automobiles are far more reliable then yesterday, as arecent JD Power and Associates quality study shows. A decade ago,General Motors had 180 problems per 100 cars surveyed. Today thatnumber is around to 130 per 100 cars surveyed. That is almost asgood as the quality of Toyota a decade ago, which had 127 defectsper 100 cars. Toyota still is higher quality then General Motorstoday, with only 107 problems per 100 cars.

The pickup truck market is an oligopoly that is starting togain the interest of foreign manufacturers. The market is forcingautomobile manufactures to make their products better quality andmore innovative as companies like Dodge, Toyota and other foreignmakers start to grab more market share up. If anybody loses inchanges to the truck market, it is those who work in the autoindustry, who find their jobs building trucks being replaced bylower-paid workers in foreign ‘transplant’ factories.

Works Cited

Edmunds.com. "New VehiclePrices: New Fullsize Regular Cab Trucks." Edmund’s AutomobileNews, Inc. 25 Sep. 2002.<http://www.edmunds.com/new/type/truck/fullsizeregularcab/>

Edmunds.com. "New Vehicle Prices: New Midsize Sedans."Edmund’s Automobile News, Inc. 25 Sep. 2002.<http://www.edmunds.com/new/type/sedan/midsize/>

Edsall, Lary. "Mid-size Matters." Motor Trend.(May 2002)

GreenerCars.com."GreenerCars.com: The Best of 2002." Alliance for Cleaner CarEngineering. 25 Sep. 2002.<http://www.greenercars.com/byclass4.html>

Insurance Institute for Highway Safety. Injury,Theft and Damage Losses: 1999-2001 Models. Washington:Insurance Institute for Highway Safety, 2001

Keith, Naughton. "Japan Gears Up: Detroit facestougher competition where it counts: SUVs, minivans and trucks.".Newsweek. (2002)

McConnell, Campell R. and Stanely L. Brue.Economics: Principles, Problems and Policies. Boston:McGraw-Hill. 2002.

"Monopolistic Competition and Oligopoly" EssentialPrincipals of Microeconomics. Unit 8 Summary. 28 Sept 2002.<http://www.howardcc.edu/social_science/micropdf/unit-8.jb.PDF>

Muller, Joann. "Autos: A New Industry; Yes Detroit islosing market share. But America is the big winner, as foreigncompanies turn the US into the center of a global industry."Business Week. (2002)

PickupTruck.com. "Sales Figures: Top 10Pickups." 10 Oct. 2002. PickupTruck.com, Inc., 13 Oct. 2002.<http://www.pickuptruck.com/html/otf0999.html>