Truck Dealers The leading manufacturers of light- and medium-duty passenger trucks are General Motors and Ford, which together account for over half of the passenger trucks sold in the U.S., as shown in the following chart: Industry Overview 2005 Passenger Truck Sales Truck dealers are either traditional automobile dealers carrying passenger trucks and sport utility vehicles (referred to as light-duty or medium-duty passenger trucks), or dealers specializing in selling and servicing new and used commercial trucks and tractor-trailer rigs (referred to as medium- and heavy-duty truck dealers). Customers of the latter category include construction companies, over-the-road trucking firms and other commercial users. An estimated 22,200 new car dealers sell light-duty passenger trucks and cars, and approximately 2,850 dealers specialize in medium- and heavy-duty trucks (Automotive News, "2005 Market Data Book"). Light-Duty Passenger Truck Sales (As a Percentage of Total New Vehicle Sales) 50 40 34 36 41 43 39 40 48 49 45 47 54 51 52 56 Hyundai-Kia (258,510 units) 2% Nissan (504,205 units) - 5% General Motors (2,669,560 units) 29% Honda (624,650 units) 6% Toyota (1,434,974 units) 15% Ford (2,100,516 units) 23% Daimler/Chrysler (1,650,887) 18% The market share leader in the U.S. for sales of medium- and heavy-duty trucks (classes 4 through 8) is Freightliner, which controls 24.6% of the market for trucks in these classes, followed by International, with 20.3%, and Ford, with 12.4%. Medium- and Heavy-Duty Truck Sales (% Share of Market, by Manufacturer) Other - 5.2% Chevrolet - 3.6% Sterling - 4.3% Freightliner - 24.6% Volvo - 5.3% 53 Mack - 5.5% International 20.3% GMC - 5.5% Kenworth - 6.2% Peterbilt - 7.1% 30 Ford - 12.4% Source: Auto Exec, “NADA Data 2006,” May 2006. 0 Source: Auto Exec, May 2005; Automotive News Data Center, January 9, 2006. 2005 2004 2002 2003 2001 1999 2000 1997 1998 1994 1995 1996 1992 1993 1991 20 10 *Other (277,530 units) - 2% *Includes Mazda, BMW and Volkswagen. Source: Automotive News, “2006 Market Data Book.” Sales of light-duty and medium-duty passenger trucks (classes 1, 2 and 3) have represented a growing percentage of new vehicle sales at auto dealerships. In 1990, sales of light-duty trucks (including pick-ups, vans, minivans, and sport-utility vehicles) represented 32% of new vehicle sales. In 2005, passenger trucks represented 53.1% of all new passenger vehicles sold. The chart below shows the level of sales for light-duty trucks between 1991 and 2005: 60 (9,033,146 New Units Sold, % by Make) Manufacturers sell their trucks through a network of “franchised” dealers – like new car dealers, who are referred to as franchises (AutoExec, “NADA Data 2006,” May 2006). © 2006 Profile America, Inc. All rights reserved. www.profileamerica.biz Issues and Trends Medium- and Heavy-Duty Truck Dealers (% of Total Average Sales, $39,152,832) Sales of light-duty passenger trucks fell in 2005 for the first time in many years, slipping an estimated 2.5% (from 9,175,183 to 9,033,146). (Truck and SUV lovers should take note that these vehicles still outnumber passenger vehicles on the road, since sales have been so robust over the past few years.) Ford and GM brands suffered the biggest losses – falling by 8.7% and 3.9%, respectively. Winners in passenger trucks were Honda, Nissan, and Hyundai, increasing by 13.3%, 12.0% and 11.1%, respectively (Automotive News, January 9, 2006). In the medium- and heavy-duty truck segment (classes 4 through 8), a different story played out in 2005. "It was a banner year for commercial truck sales," according to figures compiled by Wards Communications (Primedia Insight, January 13, 2006). Driven partially by the strength of the economy, sales increased by 18.5% – the strongest increase in many years (Ward's AutoInfoBank, January 2006). Medium- and heavyduty trucks range from Class 4 delivery vehicles and other commercial trucks to Class 8 trucks, which are generally used in long-distance transportation (think tractor-trailer rigs). Truck Category Weight Up to 14,000 lbs. (light- and medium-duty passenger vehicles) Classes 1 - 3 Class 4 14,001 to 16,000 lbs. Class 5 16,001 to 19,500 lbs. Class 6 19,501 to 26,000 lbs. Class 7 26,000 to 33,000 lbs. Class 8 33,001 lbs. and over In 2005, Class 8 trucks represented half of all mediumand heavy-duty trucks sold, as seen in the chart below: Medium- and Heavy-Duty Truck Sales (437,987 New Units Sold, % by Vehicle Class) Class 8 Class 4 (48,493 units) - 9.8% (252,792 units) Class 5 (46,278 units) - 9.3% 50.9% $11,197,710 Service and parts sales 28.6% $23,483,232 New-truck sales 60.0% $4,458,732 Used-truck sales 11.4% Source: AutoExec, May 2005. Considering high gasoline prices and falling consumer confidence in the economy (due largely to the increased cost of oil, natural gas and propane to heat their homes), the drop in passenger truck sales is understandable. Offsetting the declines in truck and SUV sales are increased sales of CUVs (cross-over vehicles that drive like a car but look like an SUV), hybrids, and fuel-efficient sedans (The Washington Post, October 4, 2005). On the other end of the spectrum, medium- and heavyduty sales increases in 2005 were the strongest in many years. “It was a banner year for commercial truck sales,” according to figures compiled by Wards Communications (Primedia Insight, January 13, 2006.) Medium/Heavy-Duty Truck Sales Growth • Trucking firms and commercial fleets are “replenishing their inventory” of trucks, now that the economy is strong and the outlook for the next two years is bright. • With a robust economy, freight rates remain strong and truck production is healthy – pointing to plenty of inventory from which truck buyers can choose. • Manufacturers -- truckers’ biggest customers – are continuing to expand production, and their goods typically get to market by truck. • Federal EPA emissions regulations will go into effect in 2007 and push up the cost of new trucks. Many firms are “pre-buying” to avoid higher vehicle costs in 2007. • In the aftermath of hurricanes Katrina and Rita, a great many used medium- and heavy-duty trucks were purchased, decreasing the supply of used trucks and increasing demand for new trucks. Class 6 (60,154 units) 12.1% Class 7 (88,858 units) - 17.9% Source: AutoExec, “NADA Data,” May 2006. The average dealer generates revenue of over $39 million, 60% of which is for sales of new trucks. The remainder is generated from sales of service, parts, and used trucks. Sources: American Truck Dealers, www.truckinginfo.com; Fleet Owner, January 1, 2006. Some heavy-truck dealers are capitalizing on the strength in the economy and expanding or enhancing their operations. Rush Enterprises, the largest Peterbilt dealer chain in North America, for example, acquired American Truck Source in 2005 and has plans to acquire others. The publicly traded Rush dealership consists of 48 locations, many of which offer chrome © 2006 Profile America, Inc. All rights reserved. www.profileamerica.biz shops; well-appointed lounges where customers wait for repairs to be completed; high-tech tools in high-end facilities, and rental, leasing, and financing operations (Light & Medium Truck, December/January 2006). Some of the characteristics that are mentioned in the advertising that is placed by truck dealers are intended to motivate potential customers to call, or to make them feel comfortable in doing business with the dealership. Some characteristics can be categorized as “confidence factors” and some as “convenience factors.” Critical Success Factors The parts and service departments are a highly important part of the truck dealer’s business and have the potential to provide the most profit for a dealership. The following critical success factors address the role of the parts and service departments: CSFs for Medium- and Heavy-Duty Truck Dealers Confidence Factors Mentioned in Ads ASE Certified Mechanics 24/7 Towing Service Authorized Dealer Size of Inventory (Large) 24/7 Dispatched Emergency Service All Makes and Models (Parts) Expert Gas / Diesel Mechanics Same Location Since (Year) Leasing Specialist Guarantees and Warranties • Parts and service should be efficiently connected, since one functions as “customer” for the other. The parts department should provide easy access to retail customers, to shipping and receiving, and to technicians in the service department. • Give the sales force a refresher course on what to ask the customer when specifying or selling a suspension, so the customer can make the right choice. Have them ask about the expected use of the vehicle, the regional regulations where the vehicle will operate, the customer's cost preference, and how long the customer intends to own the vehicle that he or she wants to buy. • Add an outside parts sales and delivery service, to help win the customer’s business and to provide better service once the customer is on board. Source: 2005 Comparative Ad Analysis Survey, Norbert J. Kuk & Associates. Convenience Factors Mentioned in Ads Business Hours/Days “One Stop Truck Shop” Financing Available Multiple Locations Listed Invitation to Visit Website Free Parking • Consider running two shifts for the service department. Extend days and hours of operation. Special Hours for Parts/Service Location Data/Map • Immediate Delivery Opening Evenings / 7 Days Provide "one-stop-shopping" for the customer, including truck sales, parts, and service support, as well as financing or insurance. • Stay on top of technology when it comes to providing support and diagnostic tools for the service department. Source: 2005 Comparative Ad Analysis Survey, Norbert J. Kuk & Associates. Value of Products and Services in the Industry The average price of most large passenger trucks is around $30,000, although some cost much less (the Ford F-series pick-up trucks start at around $12,000), and some cost much more (Cadillac Escalades run around $55,000). In the medium- and heavy-duty segment of the trucking industry, the average price of a new truck can be calculated by taking $23,483,232 (average new-truck sales per dealership), and multiplying it by 2,850 (the number of new-truck medium- and heavy-duty truck dealers). Using these figures, total new truck sales (including all classes) reached $66.9 billion in 2004. Dividing that number by the total number of new trucks sold (431,653), derives an average value of a new medium- or heavy-duty truck ($154,985). Source: Successful Dealer, April 2006. Industry Resources AutoExec Magazine; 8400 Westpark Drive, McLean, Virginia 22102; 703-827-6871; 703-821-7230; www.aemag.com Successful Dealer, 707 Lake Cook Road, Deerfield, Illinois 60015; 847-498-3180; www.konacommunications.com Heavy-Duty Trucking, 38 Executive Park, Suite 300, Irvine, California 92614; 949-261-1636; www.heavydutytrucking.com Light & Medium Truck/Transport Topics, 2200 Mill Road, Alexandria, Virginia 22314; 703-838-1770; www.ttnews.com © 2006 Profile America, Inc. All rights reserved. www.profileamerica.biz Background Values and Benefits  Media Marketing, Inc., creators of imMEDIAte® software, has been in the forefront of sales presentation systems since 1987. 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