GM Plays It Conservative on Truck Incentives
July 10, 2007

General Motors appears to be serious about focusing not on sales volume and market share but instead on profitability and on not giving away the store when it comes to incentives.

GM announced a new round of incentives on Tuesday, a week after seeing June sales that tanked and a market share that sunk to its lowest mark, aside from one month when it was being struck. Despite its dismal June performance, GM’s new incentives remain relatively conservative, as they have been all year.

“To be honest,” remarked Alex Rosten, Edmunds.com’s manager of pricing and market analysis, “I expected something more than this.”

The most significant change in GM incentives was on full-size pickup trucks, which now have zero percent financing for 60 months to match Toyota’s deal on the Tundra. 

Still, GM is giving away nowhere near what its competitors are.

GM’s June Truck Sales: Low Incentives, Slow Sales

Rosten’s predictions are based on the history of June.

In June 2006, according to Edmunds.com’s figures, GM sold 97,000 large pickup trucks (half-, ¾- and 1-ton models) with an average incentive of almost $6,400 in incentives per truck. Last month, GM’s truck sales were down 23.5 percent from a year ago with the incentive per truck cut almost in half ($3,300).

Specifically looking at the light-duty models, GM cut the Total Cost of Incentives (TCI), Edmunds.com’s calculation on its trucks. TCI takes into account all of an automaker’s various U.S. incentives programs, including subvented interest rates and lease programs, as well as cash rebates to consumers and dealers.

On the Chevrolet Silverado 1500, GM cut TCI by 14.1 percent in June from the year-ago June to $3,604 a vehicle. Similarly, GMC dropped incentives by 11.4 percent in June from a year ago to $3,644 a vehicle on its GMC Sierra 1500. Both offered only about $50 more in June from May.

Dialing back on truck incentives cost GM dearly in sales. Chevrolet Silverado sales were down 26.4 percent in June; they were off 2 percent for the first half of the year. GMC Sierra sales were down 29.2 percent in June and off 2.3 percent for the first half.

GM’s Competitors Offer More

In contrast, Toyota, Dodge and Nissan had higher incentives than a year ago, with Toyota and Dodge above $5,000 per vehicle in TCI for June.

Toyota’s TCI was a whopping $5,083 per Tundra. That’s a 4.2 percent increase over the incentives offered last June when Toyota was beginning to wind down its inventory of the old Tundra. But it was up a hefty $2,200 plus per truck from May.

Toyota, determined to sell 200,000 Tundras this year, launched extremely aggressive incentives on the Tundra mid-June. Toyota offered nationwide cash rebates of $3,000 or more and zero-percent financing for 60 months. In some markets, including Los Angeles, other promotions were added to the national campaign.

The incentives delivered the results Toyota intended. Toyota sold 21,727 Tundras in June, up 137.2 percent from a year ago. At that level, Toyota is well above its needed monthly mark to sell 200,000 Tundras a year.

Toyota's incentives expired Monday but have been extended in some regions, including Los Angeles and those covered by distributor Southeast Toyota.

Toyota didn’t offer the heftiest truck incentives in June, however. Chrysler is selling down the current Dodge Ram to make way the new 2008 model. To that end, Chrysler bumped up incentives by 12.4 percent in June from a year ago to an eye-popping $6,831 per truck –- the most of any truckmaker.

Nissan bumped its incentives up by the largest year-over-year percentage amount -- 27.1 percent -– to $3,363 TCI per truck. Sales in June were down 21.8 percent from a year ago and off 15.9 percent for the year.

Ford was the only other truckmaker besides GM to lower incentives. It cut incentives on its F-Series pickups by 14 percent in June from the previous June. F-Series sales were flat in June. Flat was better than the decreases seen in the previous two months. The F-Series was down by about 9,000 units in May and 22,000 units in April. That puts F-Series for the first half of the year down 11.2 percent.

Ford just introduced its 2008 F-Series, the last model year in its current configuration. It adds new features for this model year. The completely revised F-Series arrives next fall as a 2009 model year.

Ford, meantime, announced Tuesday it had extended its end-of-the-model-year incentives that offers buyers zero-percent loans on all 2007 Ford, Lincoln and Mercury models through August 31. Pickup truck and SUV buyers get the free loan and a cash rebate of $2,007. Ford’s incentives had been set to expire Monday but will be continued through August 31.

TOTAL COST OF INCENTIVES -- Full-Size Pickup Trucks

TCI
Make	Model	Jun-06	May-07	Jun-07	06-07 Change
Chevrolet	Silverado 1500	$4,195	$3,557	$3,604	-14.1%
Dodge	Ram 1500	$6,079	$6,755	$6,831	12.4%
Ford	F-150	$4,966	$4,125	$4,272	-14.0%
GMC	Sierra 1500	$4,112	$3,442	$3,644	-11.4%
Nissan	Titan	$2,646	$3,486	$3,363	27.1%
Toyota	Tundra	$4,878	$2,877	$5,083	4.2%

Source: Edmunds.com

Posted by Michelle Krebs at 9:24 AM under Analysis , GM | Comments (1) | digg this | Seed Newsvine