The Chevy Silverado is the second best-selling vehicle in America. It cemented that position with sales of 40,716 in January, up 14.5% year over year. Nevertheless, in the ultra-competitive field of full-sized pickups, Chevy has discounted a model of the truck by over $9,000.
Chevy’s discount on the Silverado 1500 Crew Cab LT All Star 4WD model can be as high as $9,678. This includes a $6,000 cash allowance, $2,928 reduction below manufacturer’s suggested retail price (MSRP) and $750 option package discount. The package is only available to qualified buyers, presumably people with good credit, and financed through GM Financial. Alternatively, buyers can opt for 0% annual percentage rate (APR) financing for 72 months on all 2018 Silverado 1500 Crew Cab LT models.
Among the things that have to make General Motors Co. (NYSE: GM) management concerned about such heavy discounts is that the Silverado is well regarded and gets good reviews. However, the Silverado trails the top-selling vehicle in the United States for decades, Ford Motor Co.’s (NYSE: F) F-150, which had sales of 58,937 in January, up 1.7%. Following close behind the Silverado is the Ram pickup, which Fiat Chrysler Automobiles N.V. (NYSE: FCAU) has rebuilt and substantially updated. Fiat Chrysler sold 29,358 of them in January. This was down 13.1% from the same month a year ago. Ram has an “all new” 2019. It has been forced to offer huge incentives for the 2018 models — up to $11.856 on some models.
The Silverado discount and similar offers on some Rams drive down the profits on these products. Since each of the three large U.S. car companies counts on these products for a tremendous part of their sales, they need to struggle with whether they can make money on the pickups as they fight for sales.
A price cut of $9,678 for the Silverado is only a symptom of a larger problem.