General Motors staves off a spring sales swoon by putting fuel-conscious buyers behind the wheel of some of its most-efficient cars and light trucks and also taking advantage of inventory-strapped rivals unable to aggressively market their products.
Don Johnson, GM’s chief U.S. sales analyst, blames fluctuating fuel prices and a wait-and-see attitude among shoppers for the downshift in overall industry sales in May. GM’s deliveries rose 7.3% to 221,192 units, but volume dropped from prior-year’s 223,430 with two fewer selling days.
Auto makers continue to report results throughout the day before the final tally.
But with key rivals such as Toyota and Honda struggling to ramp-up production again after the Japan earthquake and tsunami in March upset the supply chain in their domestic market, thin inventories have forced them to back off on marketing spending.
Third-party estimates show industry incentives remaining at lows not seen since 2005 and down slightly from April, especially on small cars. Even GM, traditionally the industry’s incentive leader on a dollar basis, saw its discounting reach the lowest levels since before its 2009 bankruptcy, Johnson says.
The dynamic of plentiful inventory and competitive pricing proved fortunate for GM, which expects to book both total and retail market-share gains in the month.
The auto maker has assembly plants running full tilt building attractive new fuel-misers such as the Chevy Cruze compact car and Chevy Equinox and GMC Terrain small cross/utility vehicles.
The Cruze achieves up to a 42 mpg (5.6 L/100 km) on the highway, while the Equinox and Terrain can average 32 mpg (7.3 L/100 km) in the same cycle.
“A number of consumers continue to wait and see how fuel prices are going to (turn) out and stabilize over the long-term before they make a purchase decision,” Johnson says during a sales briefing for journalists ahead of today’s results.
“Obviously, there was lower availability of inventory for some manufacturers, particularly in small vehicles, and we saw much firmer pricing in the market. We saw lower advertising,” he says. “The consumer was sitting back, trying to decide if the short-term was really the time to buy.”
Johnson considers buyers’ reluctance a “short-term phenomenon,” perhaps extending in to June. But he also sees strong fundamentals such as pent-up demand, rising consumer confidence over the long term and better economic conditions pointing to “moderate, steady growth for the industry.”
The Cruze delivered a blockbuster month for GM in May, with 22,711 deliveries, up 20% over the rickety Cobalt it replaces. In the key market of California, sales of the high-content, high-style car surged five times over its predecessor when compared with year-ago on a retail basis.
The highest miles-per-gallon Eco model of the Cruze, which began production in February, now accounts for about 15% of the car’s sales. Brand-wide, sales of 4-cyl. engines at Chevrolet now run at a 50% clip, division sales Vice President Alan Batey tells Ward’s.
The performance put Cruze on pace to unseat the Honda Civic as the best-seller in its segment for the month, with Honda yet to report.
The last time a GM compact car placed first in its segment was the Cobalt in 2005, Ward’s data shows. And the last time a GM compact beat the Civic was June 2006, when both finished behind the Toyota Corolla.
The Equinox and Terrain, still fresh from their launch two years ago, booked gains of 45% and 54%, respectively. Available in both 4- and 6-cyl. models, the smaller engines now account for upwards of 78% of their sales. Since their launch, 4-cyl. engine penetration has stood at slightly more than 70%.
GM says some of the sales softness it experienced in May lies in lower fleet deliveries, down 16% due mostly to a 21% drop in demand from rental companies. Sales to commercial customers rose 19%.
In total, GM’s fleet deliveries accounted for 32% of May sales and so far this year track at 27% rate.
GM finished May with 584,000 vehicles in stock, with an estimated 183,000 units of car inventory.