The rental car image is a bad one to garner. Chevrolet in particular has bestowed us with more than a few vehicles to fit the portrayal, but image isn’t the only thing to hurt an automaker when selling in the masses to rental and fleet companies.
General Motors has used the rental sector for years to bolster its overall market share in the industry at the expense of lower profit margins. This is a trend the automaker has vowed to kick, and the cuts are going deeper recently. Automotive News reports GM made an 11-percent reduction in rental sales last year alone, or about 50,000 vehicles.
However, just this past January, rental sales dropped 13,000 vehicles, a sign of further cuts to come.
GM’s rationale, and a sound one at that, is the low margins from rental sales hurt residual value of its vehicles and decrease a brand’s favorable image. Now, GM said it will chase more profitable sectors and really push to sell more to the retail market.
“We’re not going to chase share for share’s sake. We want to see profitable growth,”GM CFO Chuck Stevens said last week. The rental business “is not an overly profitable segment,” he added. GM expects to bring the share of rental sales down from 22-percent in 2015, to 20-percent in 2016.
The results mean less vehicles potentially sold in overall market share, but positive growth in other sectors. Chevrolet posted a 0.4-percent gain in retail market share last year, the largest of any mainstream brand, despite overall share falling from 12.3- to 12.2-percent.
It’s not only the retail market, though. GM said it will also look to small businesses and big corporations to “relocate” the rental volume with more commercial van and truck sales.