Usually, in the U.S. pickup truck market, whichever company has the newest truck normally gets a bump in sales. While it’s hard to get Chevy guys into Fords and vice versa, about 6% of the market does shift to the most recently updated pickup because of businesses making decisions based on dollars and cents, not brand loyalty.
General Motors has the newest trucks on the block in the 2014 Chevy Silverado and GMC Sierra, but in a growing overall market GM’s pickup trucks last month saw an annual decline in sales. Some analysts say that GM priced their new pickups, a key profit generator for the company, too high. Supply issues with parts for the 5.3 liter V8 have also restricted sales. An analyst at Morgan Stanley also attributed the September decline to “stair step programs” for dealers and other incentives that were offered in August which pulled sales forward. Now, GM is taking the rare step of offering incentives on recently introduced vehicles, the new pickups, apparently to compete with heavily discounted trucks at Ford and Ram.
Year to year sales of GM’s full size pickup trucks were down 8% in September. The new 2014 models made up 60% of sales as they move out remaining stock of 2013 trucks, which the company says are dwindling. Overall GM sales were down 11%, attributed to slower sales of Chevrolet vehicles and a steep drop in rental-fleet delieveries.
Now GM has told dealers that for October the company will give customers $1,000 cash rebates on the 2014 Silverado, along with $500 in incentives on premium trim packages like the Texas and All Star editions. There is also a “sales manager bonus program” that gives dealers $200 when they sell particular Silverados. Kurt McNeil, GM’s vice president of U.S. sales operations, confirmed the incentives but he said that the discounts were a planned part of the rollout of the new trucks and not a response to discounts at competitors. “We’re going to continue to work our plan and introduce them in the right way,” McNeil said. He predicted that sales of the trucks will improve as lower priced and higher volume models start arriving at dealers.
The early production mix has favored V8 models with more expensive trim and equipment and McNeil said that sales should get better as dealers get more V6 powered trucks and less expensive option packages. Some dealers have complained that after early adopters and loyal GM truck owners bought their trucks when they first came out, the new models have become a harder sell because of the discounts at Ford and Ram. “If you didn’t have any ’13s left, then you were stuck trying to sell the ’14s without any incentives,” said Courtney Cole, who owns a Chevrolet store near Indianapolis. “They might be pretty, but not everybody is going to pay full price.” Some analysts say that full price was set too high in the first place. While GM’s pickup truck sales declined last month, Ford F-Series truck sales were up 10%.
If pickup truck buyers are choosing more dated products to save money, that doesn’t portend well for Chevy and GMC. McNeil insisted that everything is going according to plans and that consumers are opting for discounts at competitors in part because GM is concentrating on profit margins, not volume. In September, the average transaction price on GM pickups was up ~$3,000 from 2012 and up $800 from August. “No one was close to us from an incentive reduction standpoint and a [price] increase standpoint,” said McNeil. “We definitely took a different tack.” He also said that the initial rollout of the new trucks is still underway and that the company is still rushing to get the new trucks on dealer lots. “We’re still very much in launch mode,” McNeil told the Bloomberg news agency.