Price Differential With Competing Pickup Trucks Has GMC & Chevy Dealers Upset

Many dealers are complaining that price differentials between the all new GM pickup trucks and heavily discounted competitors from Ford and Ram are leaving them with disappointing sales results. The new Chevy Silverado and GMC Sierra were launched in June amid heavy incentives from competitive brands. But the trucks, which have been praised by the press, are not moving quickly. Automotive News reports that a Pasadena, Texas dealer says that his supply is up to 170 days, compared to his normal inventory of 110 days supply. A dealer in Austin reports a 120 day supply, up from his norm at 90 days.

GM’s original business plan for the new trucks was to sell premium trucks at higher transaction prices but CEO Dan Akerson’s dual goals of gaining market share and improving profit margins may be conflicting with each other. Dealers now say that to compete with Ram and Ford who are offering up to $9,000 in incentives on some 2013 models, GM will have to start discounting the new trucks.

Dealers feel that once their competitors’ 2013 models are sold off they expect to encounter less price competition but they feel that the lack of incentives on their own 2014 trucks are stalling what is a very important launch.

September U.S. sales of the Silverado and Sierra were down 8 percent, while Ford’s F-series sales rose 10 percent and Ram’s climbed 8 percent.

GM officials have indicated that they’d rather keep transaction prices high than chase after market share. While September sales were down, average transaction prices year to year were up about $3,000. An analyst at RBC Capital Markets said that a $2,000 increase in transaction prices would translate to an additional $1.3 billion in GM’s bottom line for the year.

The company had increased cash incentives on the Silverado to $1,000 at the beginning of October plus another $500 discount on more expensive trim packages but dealers were disappointed when only a week later the company raised the MSRP on the trucks across the lineup by an average of $1,500.