In With the Good Sales, Out With the Bad: GM Plans to Further Shrink Fleet Sales

Matt Posky
by Matt Posky

General Motors has decided to further shrink its outgoing fleet of rental vehicles to prioritize its in-house vehicle lending service, Maven, and focus on getting newer cars to customers. That does mean building fewer vehicles overall, but GM shouldn’t care if it can keep raking in the profits — something rental fleets aren’t particularly good at in lower volumes, unless you’re the one charging a daily rate.

Alan Batey, president of GM’s North American operations, claims sales to rental fleets should drop by about 50,000 units this year and an undisclosed amount in 2018. It follows the company’s trend to scale back fleet sales in general. Big businesses accounted for 16.1 percent of its total U.S. sales in 2014, but that was reduced to 11.7 percent in 2016.

“We like the rent-a-car business from a seats-in-seats perspective, because it’s great test drives and it’s a great opportunity to expose new people to our products,” Batey told Automotive News. “We don’t like it when it’s bringing too many nearly new vehicles back into the market to compete with our new business and compress our resale values.”

CEO Mary Barra has continued to shift GM away from volume as a means to make money. The brand has pulled out of some foreign markets to focus more on the domestic arena. Even in China, where high-volume seems within any clever automaker’s grasp, the company has been highly selective of what it sells. The strategy seems to be working. GM earned more than $12 billion in pretax profits in North America last year, resulting in record profit-sharing payments to UAW-represented workers.

One of the reasons to slow fleet production had everything to do with GM’s vehicle surplus. Profitability aside, the overall market is slowing and the automaker has allowed its inventory to hit the highest level in nearly a decade. Batey claims GM has 44 percent more inventory than it did a year ago.

“You have to react to what’s happening in the market,” he said. “We don’t control the external environment, but we have to react appropriately once we get clarity. We’ll take whatever actions we need to ensure that we keep our discipline in the marketplace.”

There’s also Maven. GM is funneling more of its supply into its own short-term rental fleet, hoping to expand it into a national phenomenon — like ZipCar. But it doesn’t want to eliminate its product from places like Avis, Enterprise, or Hertz altogether. It just wants to keep them hungry and ensure the cars on their lots are the latest model year, hopefully whetting renters’ appetites for one of their current offerings.

It’s a fairly nuanced and disciplined approach to dealing with the changing market, especially when it would be so much easier to stay the course and offer massive discounts when the market doesn’t immediately turn around.

“What’s different today from seven or eight years ago is we now have a full captive in GM Financial that’s really gaining momentum and gaining steam,” Batey said. “We’re able to really look at this holistically. We want to have a very strong lease portfolio, and we want to manage the back end of that in a very controlled manner.”

[Image: General Motors]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • Fred Fred on Jun 12, 2017

    We had a couple of OEM clients that we didn't make much money on. The idea was that they provided some volume to keep the place open and moderate some of the ups and downs.

  • EspritdeFacelVega EspritdeFacelVega on Jun 12, 2017

    Every so often GM and FCA make noises about stepping away from the rental market. As I recall the whole reason the last-gen Impala stayed in production (like the 'Bu Classic years ago) was so the new model wouldn't go into fleets. But, as if by magic, within months I was driving the new Impala, courtesy of Enterprise. Profits must be razor-thin for this market but it keeps the factories running, I guess. It certainly doesn't help resale values or brand equity.

  • Frank Drove past there last week, plant has a huge poster of a bronco on the outside. I was thinking "Is that where they build the new broncos?" I know they use to make the Edge and that other mundane SUV there but I believe both have been canned.
  • CanadaCraig Toyota saw this coming. So good for them for being courageous enough to say, "Wait a minute. Let's not rush into anything."
  • Rna65689660 As the previous owner of a Triumph, and current owner of a MINI, I say, LOL!
  • Yuda 1) EVs are garbage and a complete waste of time and money 2) Ford IS a business after all, cars and trucks ain't free, they take a lot of time and money to Actually make, manufacture, and build 3) SD trucks are actually useful and practical
  • Tane94 If there is market demand, build the vehicle. That's what Ford is doing. Kudos