Those closely following General Motors may have noticed the automaker’s strong determination to decrease sales to daily rental companies (like Hertz, Avis, Budget, Enterprise, and others) and instead replace them with retail sales — those to individual consumers. In fact, every GM sales-related media call and press release emphasizes this game plan.
The reasons behind the strategy are quite sound: sales to rental fleets are significantly less profitable than those to individuals. By association, the New GM no longer treats its vehicles as a commodity, since every unit must contribute as much as possible to the bottom line.
The good news is that GM is executing the strategy exceptionally well: the average GM customer paid roughly $35,000 for a new vehicle in 2015, a 13 percent increase from the $31,000 ATP (Average Transaction Prices) GM netted in 2013. Meanwhile, GM’s percentage of total sales that went to lower-profit daily rental fleets fell 2.8 percent from 15.8 percent in 2013 to 13 percent in 2015.
The outcome is quite favorable: GM is growing its retail market share — the one that truly counts towards the bottom line (read: profit margin), while fewer sales to fleets boosts resale value of the models sold or leased at retail. Combine that with naturally-higher profit margins for new models such as the 2016 Malibu and 2016 Cruze, and GM’s profitability looks even better still.
Seems like a win-win, wouldn’t you say?