General Motors has prided itself on being a decidedly more disciplined automaker since emerging from bankruptcy. One of the major places it has pulled back is in the rental sales market. With fewer cars sold to Hertz and Enterprise, GM loses out on big sales figures but also remains a more profitable automaker in the process.
Alan Batey, GM North American President, told Automotive News the cuts would continue into 2018 and will mark four straight years of cuts. GM’s rental sales are on pace to fall 50,000 units this year, though, next year’s sales have not been disclosed yet. In 2014, GM’s rental sales made up 16.1 percent of its overall sales numbers—that figure was 11.7 percent in 2016.
The additional cuts could bring the percentage into single digits—a very good thing for GM.
“We like the rent-a-car business from a seats-in-seats perspective because it’s great test drives and it’s a great opportunity to expose new people to our products,” Batey said. “We don’t like it when it’s bringing too many nearly new vehicles back into the market to compete with our new business and compress our resale values.”
Vehicles returning to the market after rental duty wreak havoc on new car sales and cause residual values to plummet on many models. Not to mention, rental fleet sales are often a money-losing business for automakers. GM’s old way of thinking would pump thousands of cars into rental fleets to keep assembly lines humming and total sales figures high.
GM must combat a different front, however: rising overall inventories. The automaker has 44 percent more vehicles on hand than this time last year. The automaker insists it’s stockpiling cars as it plans for long periods of downtime at many U.S. plants. However, if sales continue to plateau, it could spell trouble.