General Motors reportedly boosted incentive spending for its pickup trucks in February, a notion that the automaker (somewhat) disputes.
Citing J.D. Power dealer data, a report from Bloomberg News noted that discounts averaged about $6,996 for the Chevrolet Silverado and $5,315 for the GMC Sierra from February first through the 12th, representing a 45 percent increase for the Silverado and an 82 percent for the Sierra compared to the same time frame in 2016.
The deals are part of GM’s Truck Month promotional campaign that highlights includes discounts of roughly 25 percent off the sticker price of some 2016 GMC Sierra pickup trucks and about $11,000 in discounts for select 2017 Silverado models.
The full-size pickup truck space is the most hotly-contested segment in terms of volume and profits in the U.S. automotive industry, with some analysts pegging $8,000 to $10,000 in gross profit per each pickup truck sold, thereby accounting for the majority of GM, Ford and Fiat Chrysler earnings. Observers are interpreting the increase in GM incentives as escalating a price war with primary rivals — the Ford F-Series and FCA’s Ram Truck.
GM is being “especially aggressive on incentives,” wrote Barclays analyst Brian Johnson in a note, adding that GM’s incentive spending on large pickups is at the highest point available in data since 2012, “and the second highest month isn’t close.”
Specifically, Power Information Network (PIN) data shows that GM reportedly spent 26 percent more in discounts on each Silverado than Fiat Chrysler did for its Ram pickup and 85 percent more than Ford on its on F-Series.
GM Disputes The Findings
GM disagrees, but in a somewhat conflicted manner. In a press release outlining its February 2017 sales results, the automaker stated that its internal data shows that “incentive spending was essentially flat year-over-year, which is in sharp contrast to recently-published PIN estimates that noted an increase of 2.7 percentage points to 15 percent of ATP.”
Earlier in February, however, GM spokesman Jim Cain stated that GM’s incentive increases are in response to competitive pressures from rivals, specifically deep discounting by Fiat Chrysler on the Ram truck.
“We wanted to get our fair share in the truck market”, Cain was quoted as saying. “The kind of incentives we offer in Truck Month are not the kind of spending we do a on a regular basis.”
GM is coming off a down year in pickup sales: in 2016, Chevy Silverado sales fell 4.3 percent and GMC Sierra sales decreased 1.1 percent. In comparison, FCA’s Ram pickup sales rose 8.7 percent and Ford F-Series sales climbed 5.2 percent, marking its 35th consecutive year as America’s top-selling vehicle line. GM didn’t fare much better in January, as sales of its pickup trucks declined while sales of the F-Series and the Ram pickup gained ground.
It’s unclear whether the increase in GM’s incentive spending is in direct response to falling sales volumes of its trucks or increasing truck sales at Ford and FCA. For its part, GM has been on a push to increase profitability at the expensive of cumulative volume by decreasing sales to daily rental fleets. February sales of the Silverado increased 17 percent and Sierra sales grew 15 percent.
The Bloomberg report notes that FCA and Ford Motor Company dialed back their spending in February.
Some industry observers posit that the increase in GM’s incentive spending is a sign that the U.S. auto market is slowing after a seven-year-long expansion. The notion has yet to be supported by actual sales figures.