STRATEGY: How fracking is boosting US heavy duty pickup sales
A recent article published on the U.S. version of Automotive News brings to light a fascinating recent development on the new heavy duty pickup market. An ongoing explosion of domestic energy production — primarily from a highly controversial extraction process commonly called fracking — is transforming rural communities across North America. Local farmers and landowners can lease the mineral rights to their property for one-time payments of $4,000 an acre or more. More money — much more, in the form of residual payments — is expected in the coming decades. Result: both the companies involved in fracking in these areas and the newly cashed-up local landowners are rushing to car dealerships to buy heavy duty pickups at an unprecedented rate.
This has prompted Automotive News to declare: “Considering the staggering number of heavy-duty pickups sold in fracking areas, neither factories nor dealers can afford to miss this opportunity. If automakers want to take full advantage, they should precede energy exploration companies into areas where shale plays are happening to make sure their rural dealerships are also up to speed.”
Autonews reporters visited Marietta OH and this is what they saw: “Until 2013, median household income here trailed the nation’s average by more than one-third at $33,445. Yet for more than a year, fracking has sent gushers of cash into the community. Here hotels are full. Restaurants are booming. The city’s median household income shot up more than 20% in one year to a 2013 estimate of $40,286, according to the U.S. Census Bureau. At Marietta’s auto dealerships, the increase in business has been immediate and dramatic. “Three months ago, we couldn’t get them financed on a $5,000 car,” Marietta dealer Jim Cobb says of one of his recent Chrysler-Jeep-Dodge-Ram customers. “Suddenly, they come in and buy a $60,000 truck and pay you cash for it.”
Autonews continues: “Before long, according to government estimates, these same changes will come to vast swaths of the continental United States and Canada. Appalachia, the Great Lakes basin, the mid-Atlantic, the Gulf Coast, the central plains, Texas — all are home to shale deposits thought to contain extractable oil and natural gas. It is a boom — with all the good and bad the term entails — that also has hit West Virginia, Colorado, North Dakota and elsewhere. And while fracking’s short- and long-term environmental impact on vital resources such as groundwater remain under intense debate, there is no doubt its economic impact is changing the fortunes of auto dealers as well as their customers.
“It’s kind of a heartwarming scene when you’ve got somebody that’s never bought a new vehicle in their life, and all of a sudden they’ve got a million dollars,” says Jeff Summers, who holds the Buick-GMC franchises in Marietta. “It’s kind of nice to be able to deliver them a brand-new truck, and that’s the first new vehicle that they’ve ever owned.”
More detail below.