GM Looks to Close 2012 Strong, Kick-Start 2013 with Confidence
General Motors Tuesday launched Chevy Confidence that offers Chevy buyers a return policy on 2012 and 2013 model vehicles as well as special, no-haggle prices on leftover 2012 models. For GM, the goal is to have a better second semester than first.
GM's first half was less than stellar. In March, GM's share of the U.S. vehicle market plummeted to 16.5 percent in March, its lowest market share in at least 90 years. GM executives were not happy with the headlines that noted that low point. After March, GM's performance improved a tad but GM still closed out the first half of the calendar year at 18.1 percent, the lowest GM market share since its early days. By contrast, GM's market share in 1991, the start of Edmunds.com's recordkeeping, was about 35 percent. At the same time, GM's inventory has been building.
Word leaking out of GM during those dreary sales months earlier this year was that debate raged between new-to-GM executives and long-timers about how to boost sales and share. Newcomers reportedly wanted an aggressive incentives plan; long-timers argued they had been down that road and it led to decimated resale values, lower profits and a damaged image. GM has worked hard to improve its product and keep incentives in check in order to boost average transaction prices, which flow to the company's bottomline, and improve resale values, which pleases customers and helps with residual values for lease programs.
Not calling it an incentive program, Chevy Confidence is clearly an effort by GM to wipe out 2012 inventory, close the model year on a high note and kick-start the 2013 model year, yet do it in a way that doesn't scream "fire sale," and instead stresses value. GM's return policy, which allows buyers of 2012 and 2013 models to return the vehicle between 30 and 60 days if they don't love it and if the car is damage-free with less than 4,000 miles on it, gives GM a simple marketing message to advertise — one that stands out from the crowd — and doesn't cost GM much. GM and other manufacturers, including Hyundai, have offered return programs in the past and they turn out to be cheap because such a miniscule number of people actually return the vehicles. Return programs also may provide peace of mind to car buyers who are on the fence about Chevy. And allowing consumers to return their purchase illustrates GM has confidence in its vehicles, much the way the Hyundai 10-year warranty did after the South Korean automaker got its quality act together.
GM, and specifically Chevrolet, has a host of new models coming in the 2013 model year, including the completely revamped Chevrolet Malibu, which faces stiff competition from Toyota, Honda and Ford, the all-new Chevrolet Spark microcar and a freshened Chevrolet Traverse crossover. In the 2013 calendar, Chevrolet starts rolling out its all-important, completely redesigned full-size pickup truck, the Chevrolet Silverado, and the full-size SUVs — the Chevrolet Tahoe and Chevrolet Suburban — that spring from the pickup truck's architecture.
"We have transformed the Chevrolet lineup, so there is no better time than now to reach out to new customers with the love it or return it guarantee and very attractive, bottom line pricing," said Chris Perry, Chevrolet global vice president of marketing. "We think customers who have been driving competitive makes or even older Chevrolets will be very pleased by today's Chevrolet designs, easy-to-use technologies, comprehensive safety and the quality built into all of our cars, trucks and crossovers." He added: "Research has shown customers respond positively to the confidence companies demonstrate with programs like this and appreciate the peace of mind that comes with knowing they have the option of being able to return their vehicle," said Perry.
An Edmunds.com analysis of June sales shows Chevrolet is well under the industry average in terms of already selling 2013 models. In June, 96 percent of Chevrolet's sales were of 2012 models, while the industry average was about 89 percent. Capacity constrained Hyundai was tops for sales of 2013 models as those vehicles represented 53 percent of the Korean automaker's June sales mix.
At the moment, Chevrolet has only two models available as 2013 editions — the Chevrolet Corvette and the Chevrolet Malibu. That changes later this month when the 2013 Chevrolet Spark goes on sale.
Still, the Chevrolet Malibu has a head start on its competition in the midsize sedan segment, with nearly 10 percent of the Malibu models sold in June — all of which were the fuel-sipping Eco version — being 2013 models. About 75 percent of the Sonata models Hyundai sold were 2013 model year, and Mazda sold about 10 percent 2013 versions of its Mazda6. The completely new Nissan Altima, which went on sale on June 26, had a scant amount of 2013s sold. Otherwise, the rest of the midsize competitors are still selling 2012 models.
But Chevy needs to be ahead of the midsize sedan curve. The segment is becoming increasingly jam-packed with competitors, some like the Toyota Camry and Volkswagen Passat with new offerings. And this fall, the completely revamped 2013 Ford Fusion and 2013 Honda Accord challenge Malibu even more.
The question now is will other automakers follow suit. Already Chrysler announced it was resurrecting a program it offered earlier in the spring that allowed buyers to postpone their first payment for 90 days.