Huge Growth Opportunity for The New Lifted Truck Market!

New lifted trucks have been around for over 10 years.  The majority of them have been manufactured by authorized manufacture upfitters who for decades have been manufacturing conversion vans.  Due to the massive decline of the conversion van market, some of the established conversion van manufactures have switched focus to the conversion truck market.

The Conversion Van Market

Before I get into the new lifted truck market, lets briefly look at the conversion van market.  Again, all the current conversion truck upfitters started their companies focused on the conversion vans.  The conversion van market at one point had over 100 manufacturers producing conversion vans.  Now, there's less than 10 manufacturers in the market.  Which is pretty much consistent with the decline of the sales of conversion vans.  1993 was the last big year for conversion van sales with 192,000 sold that year.  Think about that number for a second, that's a lot of vans!  Now the market is around 20K units a year, and still declining.  HOWEVER, there is light at the end of the tunnel!  With manufacturers offering more economical van platforms, Ford reports that it's 2014 Transit van will achieve a 25% increase fuel economy over it's aged Econoline full size van platform.  There's a perfect storm brewing in both the conversion van market, and the new lifted truck market.  Only this time, it's not a bad storm!  It is one of massive opportunity for not only the current conversion van/truck players, but for new players to come to the party!

The New Lifted Trucks Market

 Let's face it, the new truck market is big..really big compared to the full size van market.  Alright it's huge, considering the big three combined as of May 31, 2013 are on track to retail 1.7 million light trucks this year.

Current Market

The current new lifted truck market is made up of 5 main upfit manufacturers, and one silent manufacture that provides generic upfitted vehicles for dealers to use under their own branding.  Currently GM is the only OEM company that provides them with a bailment pool.  That is vehicles that are shipped directly from GM factories to the upfitters, and the upfitter has them as inventory to pull from for dealers orders.  Ram, or Ford aren't so forthcoming with a bailment, which puts their products at a direct disadvantage in the new lifted truck marketplace.  No bailment seriously hampers the turn around time for a dealer to receive the product.  Ram, and Ford dealers have to forecast multiple months out for the vehicles.  Ram, and Ford will ship direct to the upfitter from the plant, however again the turn around process can take months.  With GM's bailment, a dealer can contact the upfitter, and if they have the truck they want.  The dealer can have the vehicle in a matter of a few weeks on their lot.  It doesn't surprise me that Ford, and Ram are reluctant to do bailments.  Of the three, GM was the only manufacture that attempted to help the failing conversion van market by providing advertising funding for conversion van segment.

Opportunity

Here's where it gets good, combined the 6 new truck upfit manufacturers total market penetration is only approximately 3 tenths of a percent!  How do we arrive at that figure?  I used to work for a dealer that stocked the largest player of the six upfitters, and they told us how many units they retailed.  In addition, they openly stated that they retail more units than all of their competitors combined.  So, it's basic math to determine the total market penetration.  Three tenths of a percent, lets look at that for a minute.  The big three are on track to retail 1.7 million units, using our figure, that's approximately 5100 units.  Over ten years the products have been offered in the marketplace, and penetration is that small!  We'll address the why in a minute, first the good news.  We estimate the total market potential for new lifted trucks at 5%.  How did we come up with that figure?  We looked at the conversion van market yearly sales figures for comparison, and the size of the new truck market.  In addition, the fastest growing truck market price point segment is in the over $40k category.  Which is where the new lifted trucks price point falls.  Using our market penetration percentage figure, we estimate the new lifted truck segment potential growth from 5100 units a year, to 85,000 units a year.  That may seem high, however going back to the conversion van segment's 192k units retailed 20 years ago, and the estimated number doesn't seem so far off.  Yes, we are saying there's 1,650% growth opportunity of the new lifted truck segment!  For new truck upfitters, that's an estimated over $500 million in revenue!  Currently there a five new truck upfitters in the game, going back to the conversion van market in it's prime.  There were over 100 conversion van upfitters in the game then.  As I stated previously, there's a perfect storm brewing with both the conversion van market, and the new lifted truck market!

Current Issues

To understand why after over a decade there's so little market penetration with new lifted trucks, you have to look at the history of the conversion van marketing.  Up until a few years ago, conversion vans were under the umbrella of RV's.  They discontinued their affiliation with the RV market, and went off on their own.  They were assisted by financial support by GM, who pumped over $2 million into marketing the Chevy Express / GMC Savanna conversion vans.  RV manufacturers marketing strategy, is with RV related sites/publications, however mainly they have relied on their dealer network for promoting/selling their products.  Which, that strategy works, and has worked for years because you don't go to an RV dealership looking for a new truck.  You go there looking for an RV, however that marketing strategy doesn't work for new lifted trucks.  The advantage conversion vans have/had compared to the new lifted trucks, is consumer awareness.  Ask a millennial what a conversion van is, and they'd probably say, "a what?"  Mention lifted trucks to someone, and they will immediately think of the bigfoot monster truck.  The two reasons why new upfit truck manufacturers can't rely on their dealer network to market their products is because of the lack of consumer awareness of the products, and because on average new lifted trucks only make up 3-5% of a dealers total inventory.  It's not a franchise dealers core product offering, and a dealer isn't going to allocate large sums of their advertising dollars to something that is only a small piece of their inventory pie.  In addition, franchise dealers have been successful for multiple decades selling an OEM's core product.  They also know that the OEM is pumping billions into advertising to the end consumer of their core products.  This is where the challenge lies with new truck upfit manufacturers.  Increasing consumer awareness of their products, and dealer retention.  Upfit manufacturers depend on the annual NADA Convention to increase their dealer base.  They offer deals for dealers ordering at least 3 units.  Why 3?  Because, honestly that's how many trucks fit on a flat bed trailer.  Dealers get their trucks, and the sales people are excited about this new product offering.  What happens if all 3 of those units do not turn in a timely fashion?  They sit for 30 days, 60 days, 90 days, heck it's June and I've seen some dealers that have photos on their site with snow on the trucks.  The products become a boat anchor for the dealership, they've invested additional floorplan/dealer capital to stock the vehicles, and they aren't moving.  The dealers drastically discount the vehicles, and pray that they go away.  Ask the dealer if they will be reordering, and the usual response is, "hell no, can't give them away!"  Whose fault is it?  The dealer, or the manufacture?  It's on the manufacture, and I'll tell you why.  Unlike the conversion van market, and the RV market both have product awareness, and dealers that exclusively sell those products (RV Dealers).  Truck upfit manufactures are now in a different marketing arena that they've never had to be in before.  That is marketing their products to the end consumer.  You can't rely on dealers to do it for you, simply they won't, and don't have to!  As the manufacture it's on you to market to the end consumers, and that's where it can become very expensive for the manufacture.  All you have to do is look at what the auto manufacturers do, and spend.  They aren't doing it to promote, or market their dealers.  They want the end consumers to know about their great products.  The current inability to change how truck upfit manufacturers look at their marketing strategy, and to make necessary adjustments.  Will end up costing them much more down the road, then if they had implemented change now!

Conclusion  

Yes, there's huge growth opportunity, and money to be made in the new lifted truck market!  The current players in the market will be facing new challenges coming down the road in the form of new competition.  What will be happening in the next couple years, is others will see the tremendous opportunity, and will want a piece of the action.  In the last couple months, I've spoken with one company who is looking to do just that, and I'm aware of another who is adding a product line of new lifted trucks to their manufacturing product offering.  Increased consumer awareness of the new lifted truck products has to be on the top of all manufacturers lists.  Even higher than increasing their dealer networks.  I recently spoke to a dealer that had chosen not to re-order any new lifted trucks, and I asked him, "If you had consumers coming into your dealership asking for these products, would you still be dropping the product line?"  He said, "Of course not, we'd be ordering as many as we could get!"        

About David DeSantis

David DeSantis is the founder of conversionsforsale.com, and onlyliftedtrucks.com.  He's parlayed his experience working as an Internet Manager for an RV, boat, and auto dealership into his current business.  Working for an auto dealership that stocked new lifted trucks, he couldn't find a portal site to list/market these vehicles.  Not finding a portal site to list on, he created a successful Internet Marketing campaign of the new lifted trucks products.  After his departure from the dealership, he knew exactly what he was going to do.  "I passionately believe in the growth potential, and the long term sustainability of these products in the marketplace.  So much so, that I've built the foundation of my business on it!"-David DeSantis