The Curious Business Case of the Chevy SS

"Drew" (midnightdori)
01/23/2015 at 21:49 • Filed to: None

Or, "How I Learned to Stop Worrying and Blame The Second-Hand Market".

Good evening, Opponauts. I saw the Chevrolet SS on the cover of the "What Good Car Doesn't Sell" or some such thinkpiece, and I must come to offer a few musings on the business case of future cult classics. Frequently, I find myself perusing the threads of concepts and low volume cars - or reading up on the Jalopnik COTY, the 1992 Mazda Miata - and I find the comment about the void in the market that I find so fascinating. It comes in so many delicious flavors:

- "Why doesn't Folvoissan Mitsubaru General Motor Werke build a cheap, two seat, RWD, manual sports car like they used to?"
- "Why on earth doesn't anyone offer a brown, diesel, manual wagon like they used to?"
- "The Viper should cost $45,000."
- "How does Tavarish find all that junk?"

The answer is simple - and the business case for the Chevrolet SS is, more or less, the perfect example. Let's start with some basic premises. First: !!!error: Indecipherable SUB-paragraph formatting!!! They sold 2,479 in 2014 - to put that in perspective, !!!error: Indecipherable SUB-paragraph formatting!!! Bentley moves more cars in the US - !!!error: Indecipherable SUB-paragraph formatting!!! - than Chevrolet moves the ~$50k SS.

The second assumption I'll make is that you are not all that different from me. I'm spending my Friday night looking up sales statistics of fast cars, drinking beer, and eating pancakes. Moreover, I can tell you the difference between an S14 (the Japanese chassis) and an S14 (the Bavarian motor), I know the backstory on the VW Phaeton, I've swapped a motor or two, and I find myself most at peace on the race track.

Back to our story - why doesn't the Chevrolet SS move a lot of units? Is it the car?

Well - it's a 415hp 4-door manual sleeper that's got some serious racing pedigree half a world away and comes with magnetic ride. Decent recipe. I've ridden in one - and will try to drive one this weekend because I do love the thing. It's the perfect ride for folks who enjoy flying 20 mph over and completely under the radar. It isn't the car.

Is it the marketing? Well, possibly, but you and I know what this car is. We're the intended market for it - enthusiasts. The folks who know it exists are exactly the intended market. These are the kinds of people who talk to CTS-V wagon owners at gas stations and think the Evora makes for a half-decent family car.

The problem, and this comes right back to the economics, is that the market is swimming with competitors. Allow me to show you the chief competitor of the Chevrolet SS:

Incidentally, this is the same competitor for the brown diesel wagon, the Toybaru twins, and that damned 240SX replacement that we're probably never going to get.

The problem that the Chevrolet SS has is that enthusiasts are terrible buyers for new cars.

They buy used .

Here's what you can get for about $50k:

!!! UNKNOWN CONTENT TYPE !!!

Anything on that list sound interesting?

That's the problem - and manufacturers know that.

My friends, automakers know that they won't be selling you a car any time soon. Sure, you'll buy one used, and for a depreciation discount, but you're not haggling with dealers and getting that undercoating. And from their standpoint, the engineering that goes into making these, the NHTSA approval, lawyering, accounting, HR, and marketing that goes into each Toybaru you don't want to buy new because you can get a perfectly decent C6 for the price of a loaded Scion drives the price up past where it makes sense to sell to you, the loving enthusiast that eats and breathes that particular manufacturer's press releases.

We're a small breed, you and I. For everyone that can tell you that the E92 is the one with 2 doors and the E90 is the one with 4, there are are a hundred people who love the Camry because it has Bluetooth and keeps them delightfully grounded to the ground. For every SS that Chevrolet sold in December, !!!error: Indecipherable SUB-paragraph formatting!!! .

Anyway, every time you wonder why manufacturers don't make cars you want to buy for the price that fits your budget, or why the manual transmission doesn't come with the big motor, or why they're killing the last ounce of soul they have on the assembly line, it's because GM, for all their billions in revenue, cannot compete with Craigslist.

DISCUSSION (41)

ranwhenparked > Drew
01/23/2015 at 22:01

That, and the high operating costs of the Australian factory, the costs of shipping across the Pacific, and the unfavorable AUD/USD exchange rate basically mean that the SS is condemned to be a per unit money loser. There's no way GM can make it up in volume, the more they sell, the more they lose, so they have little incentive to do much to boost sales above a trickle.

The SS is here only to throw a bone to Australian labor unions to demonstrate that GM at least tried to do something to keep Holden viable. Its failure in North America provided further documented justification to close the Elizabeth plant.

TopSirloin > Drew
01/23/2015 at 22:02

GM, for all their billions in revenue, could very well make everyone happy. A lot of times, with the SS as a good example, they make compromises across the board trying to satisfy different needs and desires from different buyers. Instead what they end up with, usually, is something that has a lot of good things going for it, but wasn't exactly what you were looking for. Trying to make something check everyone's boxes at the same time.

From a business standpoint, that's going to be cheaper than finding out exactly what one group or sub-group of buyers wants, and meeting every expectation down to the finest details and then releasing limited production runs of this specific car. We all know that. That's why these days, being a car buyer is about compromises. What has more of what you want and less of what you don't? Unless you have the kind income that allows you to spend six figures on exactly what you were looking for... That's my 2 cents at least.

Drew > ranwhenparked
01/23/2015 at 22:16

Excellent points across the board - now all that needs to happen is for them to ship the Holden tooling across the point and for them to take advantage of the exchange rate by building the lovely lineup over here.

SlickMcRick > Drew
01/23/2015 at 22:16

I believe the issue here is that this vehicle is priced way too high. They could have made this more of a Charger fighter by offering both V6 and V8 trims with different packages. $50k is a bit of a reach for the general enthusiast market. This really could have succeeded with a better business plan. The fact that it offered a manual would give it one extra option the Charger doesn't have that some enthusiasts wish existed. V6(RS) and V8(SS).

ranwhenparked > Drew
01/23/2015 at 22:20

I hope something like that happens. They have a non-premium version of the Alpha platform for the new Camaro and a new large RWD architecture for the CT6 that Holden helped develop, so there's reason to be optimistic.

Drew > TopSirloin
01/23/2015 at 22:22

GM is like any other business - they need a profit to make a car. That means either 1.) picking up an existing car and throwing left-hand drive hardware into it or 2.) developing one from scratch, then doing all the wildly expensive torture and safety testing, dealer training, assembly tooling, and building the car. Enthusiast cars - because we like harsh rides and manual transmissions - are low volume cars for that very reason. Low volume cars need to make that difference up in price.

GM isn't willing to fight bankruptcy once a decade like Lotus to bring around the cars that the folks on this site want to see. And the brown manuals tend to languish on lots as inventory where dealers will end up selling them in the Trucktoberyotathon Saletacular for a loss.

Being a car buyer for the average Joe is wonderful. The RAV4 or Accord are awesome these days. "Decent pick-up" and "above average cargo room" and a bunch of other things that folks on our site tend to frown at because we're busy learning how McPherson struts work. You have to make enthusiast cars palatable to the average buyer because just having Opponauts as customers doesn't put Christmas hams on the tables of salesman.

Drew > ranwhenparked
01/23/2015 at 22:26

Absolutely. Turning out modern Holdens might make sense out of Lansing, I would imagine, since they're getting the 6th gen Camaro. Having a Commodore-equivalent in this market would be perfect.

In related news - looks like the prices on used models might not be holding their value quite to G8 GXP levels in anticipation for the 2015 options:

http://www.autotrader.com/cars-for-sale/…

Steve in Manhattan > Drew
01/23/2015 at 22:28

I have said this many times in this space - enthusiasts cry out: "Why doesn't ______ make a 6 speed manual V8 sedan with X and Y and Z and ..." then Chevy makes the SS, and very few enthusiasts buy it. I'd like to think I did a solid when I bought a '97 SHO in October 1997. I have a relative at GM - would like to think if I needed a car today, I'd go SS. I've urged him to get it as his company car, but he keeps going Lucerne. A Buick. I'll keep trying.

JasonStern911 > Drew
01/23/2015 at 22:29

Fair point, but if the Scion FR-S came in at $20k instead of $25k, I would have bought a new one over my slightly used Porsche 996.

One guy brought a Chevy SS to a Cars and Coffee a while back. Awesome car, but I don't think he appreciated me telling him I hope it massively depreciates so I can pick one up cheap.

Drew > SlickMcRick
01/23/2015 at 22:30

That's a bunch of added engineering cost, though. And for a car that's moving under 3k units/year in top spec, that's tough to swallow. Besides, they already have a V6 version of the car - it goes by the name "Malibu".

As to the cost - go drive one. The car justifies the price quite well. Given that, in the new market, it is a under the radar (something the Charger does poorly) RWD sedan, it's a bit of an anomaly. There's really nothing quite like it. And the interior is such a far throw from Chevrolet sedans of 5 years ago it's almost inspiring.

If you're not busy tomorrow, I'd highly suggest putting on a nice shirt and decent jeans and finding a dealership that's got one. They're really quite good.

Drew > JasonStern911
01/23/2015 at 22:36

Youuuuuuu are exactly the problem. You're why we can't have nice things.

(I bought a used C6 for half of the price the owner bought it for, so, you know, guilty as charged).

But we are the reason why automakers don't build cars we want for prices we want. Because no matter what - the used market will beat them. They have to move a certain number to make a business case, and if you can get a 997 for the same price as an STI, well, time to move the price up market to make up for lost volume.

Right here, I'll tell you I'd rather have the world's finest example of a used S2000 over an FR-S.

You're right, though. I hope they do depreciate. I want mine in white, with magnetic ride and in a manual. Perfect Blue Metallic with wheels powder coated gray.

SlickMcRick > Drew
01/23/2015 at 22:39

Malibu is FWD. This is RWD so that's a key difference there. Also since didn't the SS also come in V6 form in Australia? They need a way to get into the door. They can keep the top of the line fully spec'd SS at $50k but they need lesser models to get people to actually look at it. Have to make people want to upgrade to it. If only they could've made this in the same trims as the Camaro....

JasonStern911 > Drew
01/23/2015 at 22:44

No. For all of the accolades the FR-S/BRZ gets, it's overpriced. There's no reason the MSRP of the base model should be $8k more than the MSRP of a base model Scion TC or Subaru Impreza. That is purely an enthusiast tax. "Low production numbers means we need to charge more" - Fair enough, but I know a couple of non-enthusiasts that find the FR-S/BRZ gorgeous and would likely have bought one if it wasn't 30% more expensive than a practical alternative. It's like nobody remembers the Eclipse and Celica selling in adequate numbers by providing a sporty car at a reasonable price.

TopSirloin > Drew
01/23/2015 at 22:45

Agreed on all accounts. If I remember correctly, BMW will let you option out a car pretty much any way you like it, provided you're kosher on waiting however long it takes to build it. I think a lot of manufacturers could learn from that. GM isn't really known for enthusiast cars anyway, though they're at least acknowledging the segment and putting some serious effort into it these days.

SlickMcRick > Steve in Manhattan
01/23/2015 at 22:46

The main issue with the SS is the price. The enthusiast market that encourages them to make it tend to have quite a bit smaller budget than $50k. I think they should've had the tiers of engine options like they had with the G8. The base V6 model would more than enough cover the cost of the a fully loaded SS trim. Don't believe me? Look at how many used base G8s are for sale. For only being out two years they sold a decent amount.

Drew > SlickMcRick
01/23/2015 at 23:01

If you're buying the entry level of the sedan, what difference does what wheels the rear drives matter? I see your point - but think about it from the average consumer standpoint. Besides, for every SS Chevrolet sold in December, they moved around 181 Malibus (~180.82).

Building up the marketing, having to test a significantly different platform for US safety and crash standards, dealing with customs, and shipping fees/currency troubles that would make importing less expensive cars a very low or no margin possibility makes differing trim levels an expensive bet.

The good news is that Holden is scaling back production in Australia due primarily to currency troubles. What that means for us is that we might see Alpha-based Holden platforms being built here in the US and then shipped over. Which means future Commodores could make it to the US in the trim levels that you've requested.

JustWaitingForAMate > Drew
01/23/2015 at 23:05

I'll say what I've said multiple times.

Take the entire Holden Commodore range and transplant it in the US.

You'll have base model V6 all the way up to performance V8 in a range of trims.

You've now got a 'cheap' large sedan that appeals to a large range of buyers and price points.

Drew > TopSirloin
01/23/2015 at 23:06

I'd tend to disagree with the notion that GM doesn't make enthusiast cars - but I've met and watched John Heinricy race, so I'm probably a bit biased. Ford and GM are, for all intents and purposes, leading the enthusiast charge in this country and have been for decades. Being able to snap up a track-ready Camaro SS 1LE or Mustang GT Track Pack or Fiesta/Focus ST (and soon to be RS) all for under $40k is a crazy enthusiast bargain and a new high for them. And the Corvette (full disclosure, I do own a C6) is a superb value.

BMW will make a car the way you want - provided you want those specific option packages and are willing to shell out tens of thousands over list price. It's a fantastic way to nudge up per-unit margin while making it seem to you like you're getting value. Mini, their subsidiary, does it correctly - let people option their car without requiring full packages.

I don't mind the lack of options on the SS, though. It ticks the right boxes: good motor, manual option, a few colors, and you're out the door. Have a decent enough product up front and you're good to go.

Drew > JustWaitingForAMate
01/23/2015 at 23:08

The problem is that they're all produced in Australia, which has a terrible currency conversion. If GM could make money doing it, they would. But odds are they can't make money on anything but the highest margin (that's highest spec model for us) so that's the one they brought over.

Start making them on the Alpha line up in Lansing or Ontario and then you might have a business case for a Commodore V6.

JustWaitingForAMate > Drew
01/23/2015 at 23:09

We're heading towards 75c atm, but I don't mean build them in AU. The car industry here is dead, it needs to die. Move the production to the US or Canada as you say.

SlickMcRick > Drew
01/23/2015 at 23:15

Well I also see your point there. And if what you're saying is true then there may still be hope for a RWD Chevy sedan. They haven't had one since the 1996 Impala SS. They are long overdue. Everyone around here loves the Charger but when then G8 came out people were snatching them up. It was nice to see two Amercian Companies go for the RWD market. I made a post expressing how much I wished Ford had made essentially a 4 door Mustang just so I could get the 5.0 in a sedan with a manual (hopefully) but of course the Falcon was also an Aussie special which died out. My attention is currently in the used market since I won't have the monies for the new stuff due to my mistake of a purchase of a 2013 Civic. Made the dumb move of in impulse buy and never fell in love with the car. My eyes are currently on 2007-08 G35 Sport sedans with a 6MT.

shop-teacher > Drew
01/23/2015 at 23:17

I'm an enthusiast. I prefer to buy new. The SS is priced too high. I'd consider it is they dropped the price $7k. If they dropped it $10k, I'd be first in line. Of course, as has been covered by previous comments, they're already loosing money at the current price. So, I suppose I could go wish in one hand, and shit in the other, but I'm reasonable certain which one will fill up first.

Drew > JasonStern911
01/23/2015 at 23:17

That's not an economic case. Subaru has priced the car - and had several opportunities to subsidize it if they thought it would make the numbers work - in accordance with what they can afford to sell them for and make a decent margin. Looks or performance or some sense of enthusiast justice doesn't factor into the decision. The only question the production team needs to work out with marketing is "What margin can we make on the car?"

There is no such thing as an enthusiast tax until you look up market. GT3s, ACRs, and 458s are all cases of "less for more". The Toybaru twins aren't that. They need to hit a certain level of production to make economic sense to continue production and to cover development of a brand new platform and engine to go with it.

I understand your frustration - but if there was all this demand for Celicas and Eclipses, why did sales fall off to the point of irrelevance? Why doesn't the tC - which had all of the sporty attributes and performance of a base Eclipse RS or Celica GT - sell in higher numbers?

Drew > shop-teacher
01/23/2015 at 23:18

I bet you could fill up the other with Craigslist ads for CTS-V wagons for under $40k before you had to poop. Just in case you don't want to poop on your hands. That's an option.

Drew > SlickMcRick
01/23/2015 at 23:20

Man, I do love that VQ35. Great, great cars. Loved the interiors too. Good choice.

I'd imagine that if GM had a veritable Charger fighter (which sells, and a lot), Ford would be remiss to not get in on that party. If not just to steal sales from GM.

shop-teacher > Drew
01/23/2015 at 23:21

And it's an option I like!

Honestly, I haven't had good luck with used cars. I've had two CPO's that were hunks of crap. I'm sticking with new cars and old beaters :)

Drew > JustWaitingForAMate
01/23/2015 at 23:21

Can we borrow Mount Panorama too?

JustWaitingForAMate > Drew
01/23/2015 at 23:25

Sure.

We've got a giant rock in the middle of the desert too, want that as well?

SlickMcRick > Drew
01/23/2015 at 23:29

I was actually all in for a Ford Flex but then my dad plans on getting a C5 and I must keep up somewhat. He can't have all the RWD fun. It's gonna be awesome hitting the drag strip, race tracks and doing burnouts with him. Currently I only have my winter beater which is a 1995 Saturn SL2 so yes I need a pick me up. Also I have to catch up with my younger bro. His first car was a 2013 Ford Taurus Limited. His first car has more power than any car I've had. I cannot let this stand! It's also more luxurious as well. So I'm stuck literally trying to keep up with the Jones' since out last name is Jones.

Drew > JustWaitingForAMate
01/23/2015 at 23:35

Nah. Thanks for the offer though.

I need to get down there for an endurance race. If the atmosphere is half as drunk as Sebring, it'll be a wonderful experience.

Drew > SlickMcRick
01/23/2015 at 23:37

I've been taking a gander at the truck persuasion lately too. I've got a couple of track rats (well, one track rat, and one Miata that's slowly leaking everything from fuel to vacuum to voltage, in some order) that need towing. Quadrasteer speaks loudly to my inner geek.

The G35s are solid - but the VQ does run into limits on power if you're looking to get big numbers. Keeping up with a C5 might be some trouble. But dusting a Taurus should be doable.

JustWaitingForAMate > Drew
01/23/2015 at 23:38

We set the bar on drunken shenanigans at races.

We're a bad people when there's too much downtime between events, and heat, and easy access to beer.

SlickMcRick > Drew
01/23/2015 at 23:45

Well I'm not looking into HUGE numbers at all. Want to keep the motor NA and just do some basic mods to it. If I can get the 0-60 into the 4s I'll be more than satisfied. And just want to keep up with him at least. If he keeps it stock I'll blow past him but the moment he starts modding my hopes go out the window. His first two things are to give it the right rims if it comes with those ugly base ones and do a full exhaust. I hope he stops there because if he adds cams there's not much I'd be able to do to keep up with him lol. What's your fleet currently look like?

JasonStern911 > Drew
01/24/2015 at 00:04

Ugh. Getting buzzed enough to lose this argument even though we both know I'm right. :)

They need to hit a certain level of production to make economic sense to continue production and to cover development of a brand new platform and engine to go with it.

Unless the motor is not subsidized by being used in the Impreza and Legacy, I call B.S. but it is, so let's not pretend that the engine is a one-off like the Renesis in which development costs can be linked to a single vehicle's production run.

if there was all this demand for Celicas and Eclipses, why did sales fall off to the point of irrelevance? Why doesn't the tC - which had all of the sporty attributes and performance of a base Eclipse RS or Celica GT - sell in higher numbers?

that's a two prone question. the eclipse became irrelevant at the same time Mitsubishi became irrelevant. take a look at their product line in the late 90s when they were thriving versus their current product line, and remember that people realize that and any views most people had of Mitsubishi as far as innovation or excitement have been gone for years. if anything, Mitsubishi is the poster child for missed opportunities. imagine if during the whole Fast and Furious craze, the new Eclipse (a 2G was featured in the movie) was more than a rebodied Dodge Stratus.

as for the Celica's "death" - the Scion tC is the Celica! the Celica died when Toyota started their "young audience" brand. if there was no Scion, then the tC would be the Celica and the FR-S would be the GT86.

the biggest point that is being missed is that the FR-S/BRZ is supposed to be the spiritual successor to the AE86 - a Toyota Corolla! don't pretend like any Toyota Corolla in the mid 80s had a base MSRP of $25k-28k inflation adjusted dollars.

and don't even get me started on paying $25k+ for a car with Prius wheels and tires... I get the "makes it drift easier/cheaper" standpoint, but that totally screws the car over with respect to stock classing in some autocross clubs.

long story short, a sporty, rear-wheel drive car for cheap that looks the part has a high probability of selling. blaming enthusiasts for buying used hand-me-downs from those richer than us is incorrect. a lot of people don't have that much cash to buy a used car. many people need financing, and financing is a lot easier for a new vehicle with a warranty than a 5-10+ year old limited production sports car. the people to blame - not for the $50k Chevy SS - but for the FR-S/BRZ tier are the people who go, "meh. can't afford it. I guess I'll buy a Civic/Corolla/etc." as that just encourages manufacturers to continue to turn out the same mind-numbing crap.

CammedCTSV > Drew
01/24/2015 at 00:58

I could have bought a new car, but my 2004 CTS-V was only $15,000 and it was like new...I have no debt :)

samssun > Drew
01/24/2015 at 07:20

The answer is the price. It's always the price. If your product has some value, but you can't sell it, it's priced too high, and however awesome a 415hp sedan with manual transmission is, 50k is pricey.

At 36k they'd capture the "cheap enthusiast who'd rather get more car used" market described in the article, and a million more guys who like cars but can't afford it, justify it, or convince the wife at 50k. At 39k they'd probably still do well. To sell in quantity, it needs to come in below the luxury/sport sedans and somewhere within reach of the well-equipped family sedans it's more likely to compete with.

Drew > CammedCTSV
01/24/2015 at 08:08

I've got a 2005 CTS-V out in front of my house with the name on the title - so I think I get the logic on it.

Drew > JustWaitingForAMate
01/24/2015 at 08:10

Challenge accepted. You're cordially invited to a NASCAR race here in my native Texas. I think you will assimilate just fine.

(The racing is abysmal compared to V8 Supercars, can you please ask them when they will be returning to Circuit of the Americas in Austin? That'd be great.)

Drew > SlickMcRick
01/24/2015 at 08:35

The C5s are quicker than you expect. In '97 they're about half a second quicker to 60 (4.6 vs. 5.2) over a 2008 G35. Handle decently too. Also, they have the interior and build quality of a '97 Cavalier - and most of the surfaces are directly sourced from there, so you've got that going for you.

I've got a 2007 C6 Z51 Corvette, a 2005 CTS-V for a daily, and a 1995 Mazda Miata that I've got plans to turn into a track car. Love each one of them dearly.

CammedCTSV > Drew
01/24/2015 at 11:34

nice Drew, what all have u done to it

Nice name too!

Drew

SlickMcRick > Drew
01/24/2015 at 20:49

You sir have made another valid point. Not 100% certain what I'm getting since this purchase is planned towards the tail end of the year. Was doing some research on it and to even get 300rwhp on the VQ35 is a struggle if you plan on keeping it NA. I'm currently looking at my other option that's in my budget. The last gen GTO with the 6.0 liter engine. I've done some research on it and it seems to be a great car for the money. Additionally it'll give the coupe styling with actual room for 4. The back seats are even habitable by 6 footers. It'd also give me that V8 roar and parts aplenty. Just need to see what issues can occur with these. I heard it doesn't like to be rushed into gears and is much more of a cruiser than racer.