Is Ram Cheap Selling the Diesel Package?
Tim Esterdahl | Jul 11, 2013 | Comments 11
The full-size truck world is really enamored by the introduction of the Ram 1500 diesel option. While there are plenty of pros and cons, is it being offered at a cheaper upgrade price by Ram?
Is Ram offering the diesel package too cheaply to help it in other areas?
Ram has good reason to sell a LOT of Ram 1500 diesel trucks. It would make a world of difference in three key ways: profit, market share and meeting CAFE requirements. But, is a $2850 upcharge over a HEMI too little? Seems like it to us.
The Package Up Charge
Ram has said that the new “EcoDiesel option priced $2,850 greater than similarly equipped HEMI-powered Ram 1500,” according to a press release. This new 3.0-liter EcoDiesel V-6 has been touted as being the best in class V-6 engine option on the market. However, critics have said that if it really was to compete with the Pentastar V-6 offered by Ram the up charge should really be an additional $4,000+ with the $1350 extra for the HEMI up charge added in.
By offering the diesel option cheaply, can Ram entice customers to come back?
The $4k up charge seems a bit more reasonable especially when Jeep prices the diesel option at $4,500. Yet, with regards to the Jeep, that option is a big jump. Considering Ram’s top selling engine is the 5.7 Hemi already adding an additional $2850 isn’t that much more. Why is it such a small upcharge?
Ram NEEDS to Sell the EcoDiesel
There are three big reasons why Ram NEEDS to sell a lot of these EcoDiesel 1500 pickups. First, none of its other products make as much money as the full-size pickups. Ram must sell the full-size pickups to make shareholders happy and grow their business. How badly does Chrysler need Ram? You take Ram away and Chrysler disappears overnight.
The second big reason why Ram is offering the EcoDiesel is to try to convince customers to come back to its pickups. The fact is that Ram has had “some bad years” as one Ram rep put it. Frankly, it pissed off a lot of customers and lost significant market share. It NEEDS to offer this engine to try to convince those customers to come back. By convincing light-duty customers it can build a good diesel product in the 1/2-ton, there is hope that commercial sales will come back as well. Increasing market share is a big priority for all truck makers (see: GM barnstorming through Texas), but none more so than Ram (and Toyota).
The engine cover looks cool, but is the profit being sacrificed?
Third, CAFE requirements. Why do we keep bringing up CAFE requirements while other “truck” sites don’t mention it. Because it is a BIG deal to truck makers. You go to any press event and the reps are talking about it. Nobody wants to sell a product for a profit and then write Uncle Sam a check because their engineers couldn’t squeeze a few more MPGs out of it. That doesn’t make any business sense.
Why then do CAFE requirements matter to Ram and Chrysler? Consider this from Car and Driver:
“Then there’s extra credit for electric, plug-in hybrid, and fuel-cell vehicles. These machines already garner very high CAFE ratings, as they use little or no gasoline, but to encourage their sales, the government will factor each sale of an electric vehicle by 2.0 in model year 2017. In other words, if you sell 10,000 electric vehicles—either battery powered or fuel cell—they will be counted as 20,000 when calculating that company’s fleet fuel economy. This factor will phase down to a multiplier of 1.5 by 2021. For plug-in hybrids, the factor will start at 1.6 in 2017 and phase down to 1.3 in 2021.”
Essentially every time Toyota sells a Prius, Chevy sells a Volt, Ford sells a Fusion, Focus EV, C-Max or Nissan sells a Leaf – they get x2 credit. What does Chrysler get? Wait, you can’t name a Chrysler electric vehicle. That’s because Fiat is actually helping Chrysler by offering its 500e. It is expected to be a sales dud with an anticipated loss on each one sold.
Now because Chrysler sells a lot of vehicles that use a lot of gas and not the ones that don’t (see: Dodge Dart, slow sales), selling a lot of Ram pickups actually hurts their CAFE requirements.
Yet, if Ram is able to sell a LOT of high MPG EcoDiesels, it will be able to help offset the poor sales of the more fuel efficient vehicles it offers, thus avoiding paying CAFE penalties. How much in penalties? More than they would like. The last time, Chrysler didn’t hit the CAFE requirements was in 2004. They paid more than $8.5 M. With stronger requirements coming in the next few years and higher fines per vehicle being proposed, Chrysler/Fiat could quickly find itself paying fines again.
What does this all mean? It means, Ram could be cheap selling the EcoDiesel for many reasons including offsetting CAFE requirements.
What do you think? Is $2,850 a reasonable up charge for diesel?
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Filed Under: Auto News
Yep. Foremost, trucks are already high profit vehicles. Take away some of that high profit to offer a new package it then seems feasible and reasonable. RAM deserves credit for doing this. To contrast their recent steps forward with Toyota, well, Toyota has some catching up to do. There are a few “easy” options the Tundra needs, which are the following: Selectable eLocker, increased payload capacity and a bigger fuel tank. I think the lack of these “easy to add options” are what frustrate most Tundra owners. On the flip side, the Tundra does have plenty going for it.
2850 seems reasonable. It’s no more complex then the new V6 RAM gas motor other then it has turbos and the exhaust filter. Not sure if it will need DEF.
Here is a like to many internal images or the new RAM V6 diesel. The only thing I don’t like is chain driven cams but as low diesel RPM I could live with it.
http://www.dieselpowermag.com/.....el_engine/
All this CAFE stuff is very annoying.
I’m not much on diesels, nor do I have a need for one. Diesel itself costs way more where I live for it to be cost worthy for me.
Isn’t that what RAM’s niche is, BANG for the buck?! LOL
Seriously though, I think it is a wise move by them (provided they’re not losing money on everyone sold (which I doubt). Its funny how having market share sells so many more units – I have a friend who bought used 2007 F-150, he said “it was a good deal and it can’t be too bad as they sell a lot of them (how can the majority of buyers be so wrong)”. He’s had more problems in the last year than I have in last 4 with my 2004 Tundra (with 270K on it).
The most burgers sold by a company is McDonalds; does that make it the best burger?
Toyrulz/LJC
You both make good points.
Sadly, not many consumers know much about what they purchase. A few more dollars up front may be a good deal long term but, most only look at lowest price. WalMart is selling almost 500 billion dollars a year in cheap stuff. It doesn’t matter that most of it will will be in a land fill in 1 year. It’s the consumers job to do some work to know what they are buying. I buy Mobil 1 oil at WalMart and that’s about all. Whenever I am there I look at stuff and wonder, for the most part, what is here that anyone would want to buy?
I have been critical of the EcoBoost motor and time will tell if I am right or wrong but as one who needs to replace a truck in the next few years I spend many hours a year keeping up with what is inside these engines. When you go to the dealer to buy one of these new high tech trucks, if you don’t already know what’s inside, you are rolling the dice. If all people see is the nice interior inside the cab they are setting themselves up for the possibility of buying a truck which will cost them down the road. There is absolutely no excuse for any person to find out that the cab of an F250 diesel has to come off for major engine work 3 years after they bought the thing. I ask every owner of these trucks I see if they know this and I have not found 1 person who knew about it.
Like all manufactures Toyota has it’s issues but, the durability seems to be there and that is more important the rushing something new to market to match the others. One problem with a major engine component and any up front savings is likely out the window.
Would I buy a new RAM diesel? I would like to but, until I know the history of this VM Motori diesel as much as I know the Cummins engines, there is no way.
As a retired person all I have is what I have and I can’t give it RAM, Toyota any other truck company unless I feel I have done all I can to know I am making an investment and not a purchase.
EcoBoost at this point is unproven as are is the new RAM configurations with regard to the 8 speed trans in a truck, the V6 diesel, the V6 pentistar and the new 6.4 HEMI. At this point the Tundra V8 proven and that’s all I need to know.
It might sound strange but, the consumer needs to step up and demand quality. If you want me to purchase a new engine give me a 100,000 mile replacement warranty to prove you are serious.
People who place cheap as their top priority will get what is cheap in the short term and expensive in the long term.
That is the first price to get them selling just like the Ecoboost the price will go up once they start selling. Ram will show us if a 1/2 ton diesel can have a low enough cost of ownership http://www.autoguide.com/auto-.....-tons.html just the way GM showed us if people want a hybrid 1/2 ton.
As for “How badly does Chrysler need Ram? You take Ram away and Chrysler disappears overnight.” That would be the reason why Tundra cannot get an updated powertrain, HD Line or a Crewmax StdBed because it is a Prius for everyone not a Tundra for everyone.
Can Chrysler afford to sell them cheap? Really about the Prius? Not everyone needs the standard bed on a truck.
“That would be the reason why Tundra cannot get an updated powertrain, HD Line or a Crewmax StdBed ”
I think it is simplier than that: someone at Toyota needs a swift kick in the a$$-can I say this on this site?
@LJC – I don’t agree with my buddy, he is a new friend and I will help him next time ;). For other post – Toyota is focusing on a certain buyer and keeping number of config’s down till volume can support more. They are being conservative because so many don’t get it and stick to what Daddy had – I prefer they do that than risk the plug gets pulled on Tundra. I would have said @ss 😉
@LJC & Anon – I know a guy who bought brand new Tacoma DoubleCab to get home and find his quad didn’t fit in box. I asked him why he didn’t get the long box and he didn’t know there were different sizes – his neighbor has one and his quad fits. I always do my homework as you I can’t afford to waste money – spend more now is almost always better than even more later.
@toyrulz: My point about McD’s was a bit coy. McD’s sells the most burgers but it is certainly not the best burger. Even though the F150 is the best selling pickup in the universe, it’s not the best. My second point is both McD’s and Ford know how to reach an audience and clients-I use ‘client’ because their success is rooted in repeat business. Both McD’s and Ford know their market well and thus deserve the most sales.
I believe the Tundra could be 3rd or 2nd in sales if Toyota had someone in a position to make decisions who understands pickup trucks, the loyalty to them and the mindset of a truck owner. The only way they’re going to reach that position is with repeat business. I guess first, Toyota needs to establish what their goal is with the Tundra and go for it.