Costco Wants to Sell You a Chevy

It is improbable that a huge discount warehouse company can help a car company that is desperate to find buyers. Yet, Costco Wholesale Corp. (NASDAQ: COST) is doing just that. It has a new program to feed buyers to the Chevy division of General Motors Co. (NYSE: GM), one of the deeply wounded manufacturers that will lose tens of thousands of sales this year.

GM delivered almost 2.9 million cars, crossovers, sport utility vehicles and light trucks in the United States last year. Depending on the source, 10% to 20% of that level of deliveries could be lost this year. If there is a second wave of the pandemic later this year, the figure will be higher.

The Costco program allows its customers access to what it says are models that are already in high demand. The “Chevrolet Limited-Time Special” includes the Chevrolet Silverado, Tahoe and Suburban. The Silverado is among the best-selling vehicles in the United States, part of the huge demand for full-size pickups that has helped the competing Ford Motor Co.’s (NYSE: F) F-150 be the top-selling vehicle in decades.

The deals raise the question why GM would need a new sales channel for its popular products at all.

Costco gets to offer its members something. It gives these members a $1,000 incentive to buy the models. This can be combined with discounts GM provides, which presumably makes the deals more attractive. Rick Borg, Costco Auto Program general manager, said, “The exclusive $1,000 incentive combined with the additional incentives publicly available represents a big savings opportunity for Costco members. We’re happy to deliver this exceptional value on these highly sought-after trucks and SUVs.”

It is hard to believe that the $1,000 is coming out of Costco’s pocket. Why would it? To make its members happy. People come to Costco to buy goods, from groceries to furniture, in bulk.

Who gets the better deal from the new partnership? It is almost certainly Costco.