Sales of pickup trucks are at the strongest levels in years. The rebound in the housing market has only just recently played a role in resurgent truck sales. What has really fueled truck sales over the past few years is fracking. We need to look no farther than Texas to see fracking’s impact on truck sales. Ken Czubay, Ford’s (NYSE: F ) vice president of U.S. marketing, for example, noted a few months back that when he was down in Houston truck sales there were running very strong thanks to the booming energy sector. He took his comments a step further by saying, “At the same time, when we look at areas in West Texas, the northern plains, the Dakotas and even Pennsylvania where fracking is big, we’re also seeing big demand for the [Ford] F-series.”
Really, that shouldn’t come as a surprise. Oil and gas companies are pouring billions into places like the Eagle Ford shale of Texas. In fact, according to estimates from the research and consulting firm Wood Mackenzie, the industry will invest $28 billion into the play this year. The trickle-down effect of those funds is clearly fueling truck sales in Texas. Pioneer Natural Resources (NYSE: PXD ), for example, bought 250 Ford F-Series trucks in the past year and has plans to order another 200 in the future. The company, which is drilling in the Eagle Ford as well as the Permian Basin, is experiencing a huge growth spurt thanks to fracking the oil-rich Texas shale plays. Lynn Lyon, the Pioneer Natural Resources’ executive in charge of purchasing trucks has noted, “If you drive through our parking garage, you will see a lot of very nice, new, high-end Ford trucks.”
Ford isn’t the only company with sales being fueled by the energy industry. Kurt McNeil, GM’s (NYSE: GM ) vice president of U.S. sales operations, has called this “a great time to be in the truck business.” GM has seen sales of full-sized pickups jump in places like Texas and North Dakota, with truck sales overall up more than 20% year over year. Part of the reason for this boom in truck sales is due to the fact that oil-field workers need the power and capacity of a pickup to get the job done. In some parts of the country, a four-wheel drive is the only way an oil-field worker can reach the well site. But the other things to keep in mind are the lease signing bonuses and royalty payments that are trickling down as well. This is giving ranchers, for example, the funds to go out and buy a new truck. It’s also fueling the spending capacity of buyers who don’t necessarily need a truck but view it as an extension of their lifestyle. These lifestyle buyers range from hunting enthusiasts to those who just want to putter around the yard on weekends. But these buyers are flush with cash thanks to booming energy production across the country. Fracking really has fueled an unexpected economic boom across several parts of the country. The trickle-down effect of that boom has fueled an incredible rise in truck sales as oil-field workers, as well as lifestyle buyers, trade up. The boom has also fueled a rise in the stock prices of companies like Ford, GM, and Pioneer, which has been great for investors. As these stocks continue to rise it could fuel even more demand as lifestyle buying investors cash in some of their profits on a new pickup.
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SOURCE: By Matthew DiLallo, Motley Fool