GM recently made a small but critical change to the way it reports sales, altering the way in which it records loaner vehicle sales.
Before we get into the change, it bears covering a few technical terms to better understand what this change is and why it matters. Like other automakers, GM occasionally offers “loaner” vehicles to its customers. Also known as DRAC (“daily rent-a-car”) vehicles, GM dealers would originally record the vehicles that it placed in the loaner vehicles program in the GM sales system. Even though the loaner vehicle was not technically “sold” at that time (that is, it would not be titled and would likely be running a dealer tag/plate), the bottom line is that a vehicle sale would still be recorded in the GM sales system.
These GM loaner vehicles would be offered to customers up to a certain mileage, varying around 2,500 miles for most dealers, and up to 5,000 miles for others. Once that mileage was reached, the vehicle would then be inspected and serviced as needed, then sold as new, typically at a discount (with the disclaimer that it was used as a loaner, of course).
Previously, when the loaner vehicle was sold to a customer, it would not count as a new vehicle sale, since it was already counted as such when the vehicle was put into the DRAC program. To note, there is an incentive that GM typically offers dealers for putting a vehicle into the DRAC program.
Now, however, GM has added the following fine-print to its sales report for Q1 of 2022:
“Total vehicle sales data for periods prior to 2022 CY reflect courtesy transportation vehicles used by dealers in the United States in their business. Beginning in 2022 CY, we stopped including such dealership courtesy transportation vehicles in total vehicle sales until such time as those vehicles were sold to the end customer.”
Although this is a minor change, it’s still rather important, as it represents when the vehicle was actually sold to a customer. The net result is that a small portion of sales will shift to a later date.
To note, the latest GM sales figures for Q1 of the 2022 calendar year show a 20-percent dip, with 512,846 units sold. Sales fell at all four U.S. brands, including a 19.6-percent dip for Chevy, a 24.3-percent dip for Cadillac, a 58.2-percent dip for Buick, and a 7.5-percent dip for GMC.
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Comments
Potatoe, potato; tomatoe, tomato…………..
It is because many dealers were falsely reporting them as loaners to get them out of GM’s inventory so they would unfairley earn more units bye way of GM’s turn and earn system, even though the vehicle was still for sale on lot and not being used as a loaner !
Those units were never in GMs inventory. It’s not likely that the dealer would report them sold since they would need to pay off the floorplan financing on the unit and they would loose any benefit that they would receive from GM under the demo/loaner program.
And gm stock keeps tanking.
Inside baseball. Slow news day.
This might sound silly or unimportant to some, but if you were a GM exec whose bonus depended all or in part on sales numbers, you would feel different. Likewise if you were a dealership sales manager. While never a financial geek, I was an insider at a Fortune 500 manufacturer some years ago. Major games were played, right at the edge of legality and Generally Accepted Accounting Procedures, in order to boost the annual sales numbers.
I applaud GM for this change as it would seem more fair and honest, and because when buyers eventually purchased those ‘loaners’ the duration of their warranties is likely increased. (Not sure if sales dates correlated with ‘in service’ dates.)
Great way to boost your sales numbers. On the last sales reporting day for the month drop a bunch of units in DRAC. Our district manager used to encourage it. My previous GM always wanted to be first in the district and that’s how he did it.
Unless there has been a dramatic change in sales reporting by US automakers, all of them report sales when they are “sold” to the dealer, not when they are sold to retail customer.
No. Automakers report both wholesale and end sales, go read their SEC filings. For example, Ford has a table listing both figures side-by-side showing in Q1 2021 they sold 521,334 vehicles to US customers and 459,407 as wholesale to dealers.
Analysts and investors want to know both, “channel stuffing” is very well known.
Yes they do report both. However, their P&L is based on wholesale deliveries.
Yep . . . Now it’s simply called a Lie.
That how GM reports bad news.
Completely irrelevant since inventory is short; dealers do not have new cars to put into the Courtesy Transportation Program.