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They’re Baa-ack! GM SUV June Sales Soar on Heavy Discounting

1 July 2005

Suvsalesjune0501

Boosted by heavy discounting, GM sales jumped 41% (on an adjusted sales day rate basis) in June compared to the prior year to deliver the best overall sales month since September 1986. Countering the trend still experienced by other automakers, GM SUVs turned in an even more aggressive 66% improvement in sales. (Chart at right, Click to enlarge.)

GM’s full-size pickup truck deliveries were up 102%, with all truck sales posting an increase of 68%. Car sales (175,491) increased 4%, with several new vehicles, including Cadillac STS, Chevrolet Cobalt, Pontiac G6 and Buick LaCrosse, posting record sales results. And HUMMER had its best sales month ever.

During June, GM extended its employee discounts to all buyers.

We had great results across the board in June, and our truck business was exceptionally strong. We see this as an indication that America’s desire for trucks and SUVs is still a strong force in the marketplace. It’s really pretty simple—offer great vehicles that people want, match that with outstanding value, and you’ll get great results.

—Mark LaNeve, GM vice president, North America Vehicle Sales, Service and Marketing

“The demise of the full-size truck is a figment of the imagination of the popular press. Everybody assumes it is true but the market is still buying,” GM Vice Chairman Bob Lutz told reporters after addressing a business lunch in Switzerland. (Reuters)

Ford, DaimlerChrysler and Toyota saw sales of their full-size SUVs continue to drop in June, while Nissan and Isuzu posted gains. For the first half of the year, even after factoring in GM’s June results, only Nissan shows a gain in full-size SUV sales from the prior year.

Suvsales1h0501 Suvsales1h0502

Combined sales of full-size SUVs in the first half of 2005, again, including GM’s gains in June, are off 10.6% at 815,617, down from the 911,911 sold during the same period last year. (That is also 8.8 times the number of hybrids sold during the same period this year.)

Although the promotion gave GM an immediate boost in market share, and cleared out excess inventory, it also raised concern among some on Wall Street over the impact on second quarter earnings and cash flow.

One of the questions outstanding is what happens once GM opts not to discount so heavily.

July 1, 2005 in Fuel Efficiency, Sales | Permalink | Comments (16) | TrackBack (2)

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Comments

That's really too bad.

I guess I shouldn't have got my hopes up about the death of the SUV.

GM may have helped the demise along; by discounting so heavily they have given up a lot of profit (maybe even lost money to slash inventory) and they have satisfied a lot of the demand for the segment.  Now watch GM's sales sag even further, as those people who were waiting to buy GM are now out of the market for at least the duration of the lease....

Have you seen the proceedings of this conference?

SYNBIOS
Automotive Biofuels
International Conference
18-20 May, 2005 in Stockholm, Sweden

http://www.ecotraffic.se/Synbios/Conference/SYNBIOS_Conference.htm

Have you seen the proceedings of this conference?

SYNBIOS
Automotive Biofuels
International Conference
18-20 May, 2005 in Stockholm, Sweden

http://www.ecotraffic.se/Synbios/Conference/SYNBIOS_Conference.htm

What are the GM guys crowing about? You slash the hell out of prices and sales will go up. What a surprise! How much profit did they make on those sales? I'm guessing very little, if any. This was nothing more than an escalation in the rebate wars that have hammered profits among the big three makers for years.

E-P is right--they've very likely bought non-profit sales now at the expense of for-profit sales in the next few months.

I don't want to see any company fail or do poorly, but I also want to see them do the right thing, and this wasn't it.

Anything which accelerates the decline of the SUV phenomenon is a good thing as far as I'm concerned.  It should have been brought up short by words from the bully pulpit in Washington after 9/11, but Bush seems to want America to mis-invest.

It would be great if someone could survey those buyers, to see what their thinking really is - what their expectations of the future are. Point cases and conjecture are easy, but the really interesting thing would be to know what the body of these people are thinking.

odograph: You read my mind. I would love to know what the buyers are thinking, as well as the mix of commercial/private purchases. My guess is that there were a higher than normal percentage of commercial sales, as companies that were planning to replace part of their pickup truck fleet (and note that pickups scored the highest sales increase) jumped at a chance to do so at a great price. In other words, I'm guessing that a high portion of those commercial sales were stolen from future GM results.

I also noticed that Toyota, Honda, and Nissan had a great month, and that Ford and Chrysler weren't off by much. GM didn't steal many customers from them, they just time-shifted sales.

Honestly, I REALLY want to see Ford, GM, and Chrysler do well. I want to see them produce knockout cars that Toyota, Honda, et al. can't match at the price. That would be great for the U.S. companies (including suppliers to the Big Three), US consumers, the US trade deficit, and even the foreign car companies, as they'd be pushed harder than ever to compete. But until it happens, we owe them only the truth (with a little sarcasm thrown in from time to time).

What GM may have done successfully is (a) maintain or slightly increase their market share, which is good for future profits, and (b) reduce their inventory, which is good for keeping costs down.

Hopefully, they can transition into a sleeker, more effecient fleet once they shed some SUV capacity.

Also, keep in mind that gas prices have come down a smidge recently, and consumers who believed that gas prices would continue to fall may have purchased these SUVs.

I would not be surprised if GM is effectively locked into high rates of truck/SUV production by their no-layoff UAW contracts.

I would also like to know what the buyers were thinking. In my area, gas prices have went up in the last couple of weeks. The average is about $2.20 USD per gallon for regular.

If I had the money right now, I would purchase a hybrid. In a year or two, I will be purchasing a new car. It will be interesting to see what my options will be.

bac: Even if you're in the U.S., I'm guessing that in two years you could be looking at a clean diesel that will get very good mileage, but at a substantially lower cost than a hybrid. I think that here in the U.S. we're about to see a major shift to diesels, much more than the recent JD powers report suggested (7.5% of total market, I think, by 2012).

The best thing about clean diesels is that it would take very little to support them--just convert one storage tank and nozzle to diesel at a few gas stations in each area, supply them with the already existing delivery infrastructure, and you're there. It's not like E85 where you need to add an entirely new product to regional and local distribution channels.

Of course, once the car makers start using clean diesels in hybrids, we'll really have something to write home to Mom about.

Buyers are thinking a vehicle sold under sticker will hold it's value longer. They're thinking that, even if they need to sell, they'll recover a greater percentage of cost. GM has fouund a way to spread it's short-term thinking to buyers.

No what is going on is buyers who dont buy new trucks or cars all that often were buying while interest rates were lowest. As these people have 1980s cars and trucks heck even 1970s ones in a great many cases an suv or modern full pickup is a major boost in mpg. So the milage isnt the issue you think it is the price was.

"As these people have 1980s cars and trucks heck even 1970s ones in a great many cases an suv or modern full pickup is a major boost in mpg."

Hogwash. Sure, there will be particular cases where an individual will get better mpg by buying a new, light SUV. But, in general, cars from the late 70s and early 80s get better mileage than SUVs do now. Even accounting for deterioration in performance, most folks who are trading in a 20-30 year old vehicle are not getting much better fuel efficiency with a new GM SUV.


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