GM Trucks - Market Share vs Profit

"MooseKnuckles" (andyschenk) 05/07/2014 at 17:32 • Filed to: truckyeah, mooseknuckles

3

3

I've said countless times, as have others, GM expected to take a hit in their full size truck market share, and that's ok.

A number of GM execs/engineers have made it clear on a number of occasions that being #1 in terms of sales isn't a [top] priority to them any more. It is for VWAG, they are almost copying GM of the 90's (too many brands, cost cutting, poor quality) and like '90's GM' they are already seeing the effects - it doesn't work.
GM wants profits. More profits obviously means more money in the bank, that sweet sweet money-green means more R&D spending (better products, better quality, etc.), more limited run models like the Z/28, more reason to revive Pontiac!!

When General Motors rolled out its new line of !!!error: Indecipherable SUB-paragraph formatting!!! last summer, a barrage of criticism surrounded the introduction: too expensive, too evolutionary, too blah. But now, almost a year later, !!!error: Indecipherable SUB-paragraph formatting!!! from higher transaction prices for both the Chevrolet Silverado and GMC Sierra, helping offset the hurt from ignition switch recalls.

Almost three months ago, Barclays Capital analyst Brian Johnson had called the truck rollout "arguably the least successful large pickup launch over the last 15 years," but in a report last month, Johnson admitted "General Motors may have made the right call to go for price over share." !!!error: Indecipherable SUB-paragraph formatting!!! that GM has experienced a $5,400 spike in transaction prices, which goes to show that GM's plan may be working after all despite bumps along the way.

Much hype has been made about Ford's use of aluminum for its soon-to-be-introduced series of trucks, but the trucks from General Motors already weighed a few hundred pounds less than Ford's. Additionally, new gas mileage regulations aren't in full effect until 2019, which meant GM wasn't in a rush to meet it just yet. This meant GM could maintain lower costs while still commanding premium prices until it is time to introduce the next generation of truck, possibly in 2019. According to Automotive News , GM plans to maintain pricing by adding innovation, like an !!!error: Indecipherable SUB-paragraph formatting!!! and possibly a light-duty diesel.

Of course, this has all been at the expense of market share. Henry Brown, owner Henry Brown Buick-GMC in Gilbert, AZ, originally was a big critic of General Motors' strategy that didn't focus on market share, but he says his mind has changed since sales staff has been making sales (and profit) by touting the premium features available on the Sierra. "You can't sell a cheap one. Maybe [GM] knew the market better than we did," says Brown.

J.D. Power and Associates shows that sales have spiked for trucks over $40,000, with General Motors commanding a 37.7 percent share, up 11 percent from a year ago. However, Silverado and Sierra sales the first quarter of 2014 totaled 33.7 percent of the full-sized pickup segment, which was a drop from 36 percent from the same period a year ago when GM was phasing out its old-gen pickups.

Even with the market share loss, General Motors shows strong profits because it has resisted heavy incentives to push sales. However, not everyone is convinced—Steve Hurley of Stingray Chevrolet in Plant City, FL believes that "Chevrolet dealers aren't satisfied with what's happened with Silverado market share. We're all looking at what we can do to get that market share back."

Source: !!!error: Indecipherable SUB-paragraph formatting!!!

!!! UNKNOWN CONTENT TYPE !!!

Not only is GM ok with losing some full-size truck market share to Ram and Ford, but when the Canyon-Colorado come out later this year, they are going to be snagging conquest buyers from everyone across the board including the otherwise potential Silverado-Sierra customers. The mid-sizers will still have a nice profit margin of their own, like their big brothers, it's still profit in GM's pocket. GM full-size market share will take a hit again, but it is still a win for General Motors.
Oh, but then Ford will command an even larger gap with the F150 sales over that of the Silverado. So what!? The only effect is the intolerable Ford fan boys will chirp it from the roof tops. Not all Ford fan boys, just the intolerable ones (read: all the Ford fan boys).
GM is looking out for the company as whole to be healthy, not just the sales of a particular model.

PatBateman > MooseKnuckles 05/07/2014 at 17:40

0

All the domestic makers produce great trucks. For once, they're all on top of their game. I drive a F-150, but I think Ram makes the nicest half ton out there. Chevy/GM are great, I just think they need to update their interior and engines a bit. Still waiting to see how the new F-150s will fare, but I'm personally PISSED OFF because I was told that the 6.2 wasn't being carried over (GIVE ME RAPTOR OR GIVE ME DEATH).

I think that, in the next few years, the domestics will be trading out the thrown pretty regularly.

MooseKnuckles > MooseKnuckles 05/07/2014 at 18:10

0

I for one was hoping GM would be offering incentives on their full size trucks. In order to maintain a price gap when the Colorado-Canyon come out they would then have to offer incentives on those trucks too. I want a Canyon, that scenario would be good for me personally, especially when I'm looking at a pretty loaded mid-size rig that'll likely be about $40k.

BaconSandwich is tasty. > MooseKnuckles 05/07/2014 at 23:31

0

You are spot on. Anyone who has studied economics should also be able to back this up. You don't necessarily make the most profit selling the most items. I hate to say it, but look at Apple - they don't sell nearly as many laptops as other Windows based laptop manufacturers, but they charge a hefty premium, and they are making money hand over fist.