GM’s (NYSE: GM) Chevy has struggled to sell its Silverado pick up this year. One of its solutions is massive discounts. A current one offers 17% off on one of the Silverado models.
Through the first five months of the year, Silverado sales have dropped 5.2% to 212,425. The Silverado competes with two other full sized pickups . Fiat Chrysler’s (NYSE: FCAU) RAM sales have risen 7.9% to 207,370. Silverado has traditionally had a huge sales lead over RAM. America’s best selling vehicle is Silverado’s entrenched competitor. The Ford (NYSE: F) F-Series sold 351,965 units through the first five months of 2017, up 8.5%. Ford is well on its way to sell 750,000 of these for the full year.
Chevy’s offer on the 2017 Silverado 1500 LT is 17% below MSRP (manufacturer’s suggested retail price) The total value of the package is $8,196. The deal breaks down into $5,246 in “purchase cash” and $2,950 in “factory reduction below MSRP”. There are catches. The truck has to be in stock as of May 31. A buyer needs to take delivery before June 30.
Auto company management dread discounts. They not only eat into margins, but also can trigger price wars with other companies. Business Insider recently pointed out:
For now, automakers are playing a game of chicken with the inevitable downturn. Incentives have surged, prompting negative comparisons with past sales booms when car companies frittered away their profits in an effort to capture and maintain US market share.
“While demand for new vehicles is still relatively strong, it’s a bit of smoke and mirrors,” Jessica Caldwell, Executive Director of Industry Analysis at consumer auto site Edmunds.com, said in a statement.
A brutal assessment.
The 17% Silverado discount has to be one of the most aggressive among current car and light truck offers. It spells something GM would not like to admit. Demand for the Silverado is bad, and getting worse.