GM boosts prices as pickup truck battle rages
Oct. 16, 2013
DETROIT (AP) — General Motors is adding a twist to the fight for supremacy in the red-hot U.S. pickup truck market: It's raising prices.
GM is adding almost $2,100 to the sticker price of the base 2014 Chevrolet Silverado. That's 8.5 percent above the price when the truck hit showrooms in the spring. Other versions of the Silverado, as well as the GMC Sierra, will see similar percentage increases.
Raising prices sounds like an odd way to boost sales. But industry analysts suspect it's a marketing ploy. They expect GM to raise incentives starting next month so dealers can advertise big discounts. Customers will feel they're getting a deal — whether they do or not depends on the size of the discount.
The move comes after GM's pickup sales fell 8 percent in September while its two biggest competitors saw increases. Sales of Ford's F-Series, the best-selling pickups in the U.S., rose 10 percent and Chrysler's Ram posted an 8 percent increase. The Detroit Three dominate U.S. full-size pickup truck sales with 90 percent of the market. The Toyota Tundra and Nissan Titan make up the remainder.
GM didn't offer the sweet deals Ford and Chrysler did last month, said Jesse Toprak, an analyst for the TrueCar.com auto pricing website. Raising prices and then adding incentives is common in the business. And truck buyers especially like to get deals, Toprak said.
"This whole change in pricing strategy for trucks at GM is really meant predominantly as a sales closing tactic for dealerships," he said. The increase covers trucks built after Oct. 7, so pickups now on dealer lots won't be affected.
GM officials may also be counting on a recent change in buying habits: Consumers now pay less attention to the sticker price. Toprak says most buyers now research their cars and trucks online before buying. Many third-party auto websites suggest prices that people should pay that are below the sticker price, he said.
"Savvy customers know how to look beyond this and go to net pricing," he said.
In May, Nissan Motor Co. took the opposite strategy. The Japanese automaker cut prices and incentives so its cars showed up in Internet searches done by price-sensitive buyers. Nissan sales are up 13 percent since then.
GM spokesman Jim Cain wouldn't comment on whether the company would increase discounts when its current incentives expire Oct. 31. But he said that incentives do give dealers flexibility to promote sales, allowing cash-strapped customers to use rebates as down payments.
"That does help customers purchase a vehicle from time to time if they've got no money down," said Tom Kool, who runs a small Chevrolet dealership in Sturgis, Mich., just north of the Indiana border.
Last month, GM spent about 18 percent less on pickup discounts than a year earlier — an average of $3,430 on the Silverado and $3,339 on the Sierra, according to TrueCar. Ford, which has an older truck with a lower base price, spent about $100 more discounting the F-150, while Chrysler spent nearly $700 more than GM. Both Chrysler and Ford offered bigger discounts on outgoing 2013 models last month, while GM essentially sold out of last year's models during the summer.
Under the increases, the base sticker price on the Silverado will rise from $24,585 to $26,670, including shipping, according to GM's website. A base crew cab will go from $33,195 to $35,095.
When the trucks were introduced, GM kept sticker prices the same as 2013 models, Cain said. The increase has been planned for a long time, he said.
The increases raise the Silverado's sticker price to $1,780 above the Ram and $1,605 above the F-150. Cain says GM can command higher prices because it has the newest truck in the market with more features, including increased gas mileage.