Big discounts loom in Ram, Silverado fight
Car dealer Stephen Gilchrist has sold Ford, Chevrolet, GMC and Ram pickups in Texas truck country for more than two decades.
His rule of thumb was: “A Ford guy is a Ford guy, a Chevy guy is a Chevy guy and a Ram guy is a Ram guy,” he said.
Not anymore.
“I’ve had more people call me looking at Ram for the 12-inch infotainment screen or looking at GMC for the MultiPro tailgate,” said Gilchrist, dealer operator of Gilchrist Automotive in DallasFort Worth. “It’s the most I’ve seen people willing to jump from brand to brand and it’s for these unique features rather than the payload and towing ability.”
The intense competition in the Detroit Three’s Truck Wars has led to deep discounts, an unusual move given that two of the three have redesigned pickups out. Typically, automakers resist markdowns on newly designed vehicles because such rebates erode profits.
But in a frenzied fight for a piece of the highly profitable pickup segment, and with Ford’s F-Series secure as the top seller, General Motors’ Chevrolet Silverado and Fiat-Chrysler’s Ram are jockeying for the No. 2 slot. That means Detroit automakers appear willing to keep using price cuts to lure new consumers, dealers say.
“You’re always told your most expensive customer is your conquest customer,” said Gilchrist, referring to buyers who switch brands.
Fiat Chrysler released its second-quarter sales Tuesday. Sales of the Ram rose nearly 38.5 percent to 179,454 in the quarter compared with the same period a year ago. That makes Ram the second-top selling pickup in the United States behind the Ford FSeries, which has been the leader for 42 years.
The Ram this year has led the Chevrolet Silverado, which had historically held the No. 2 spot. Ram has been beating Chevy every quarter this year. Ford reports its second-quarter sales Wednesday.
GM reported Tuesday that Silverado quarterly sales tumbled 9 percent to 155,529 and sales of the GMC Sierra slid 4.3 percent to 56,857 in the second quarter compared with a year earlier.
Through June, Ram sales are up 28 percent to 299,480, but Silverado sales are down 12.2 percent to 255,463.
“Ram has pulled out a lot of stops with incentives to grab market share — and it’s working — while Silverado is disadvantaged in launch mode,” said Michelle Krebs, executive analyst for AutoTrader. “Still, the new Ram 1500 has garnered critical acclaim, and the brand has been on an upward trajectory in terms of reputation.”
For the automaker’s total sales year-to-date, FCA reported a dip of 2 percent to 1.1 million vehicles compared with the first half of 2018. GM reported a 4.2 percent decline in total sales to 1.4 million vehicles sold.
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GM isn’t going down without a fight, telling Reuters last week, “We will defend our franchise and we will do it the right way,” said Barry Engle, head of GM’s North American operations.
Data from Cox Automotive show that through May, the F-series has dominated sales over GM and FCA pickups and sold for a higher price. The average transaction price of the Silverado was $48,498 in the first five months compared with $49,182 for the Ram. The F-Series brought in $52,227, said Cox.
Ford’s truck manager told Reuters that GM’s and FCA’s heavy discounting of newly designed pickups is “unprecedented” and while Ford will defend its top spot, it won’t sacrifice profits.
During the past month, many dealers have offered up to 30 percent off the list price for Ram, Chevrolet Silverado, GMC Sierra and Ford F-series, Reuters reported. GMC touted June as “Truck Month” in its advertising, a wink to consumers that price cuts lay ahead.
Gilchrist said at the end of June, he was offering a 20 percent discount on the list price of 2019 Ram 1500 pickup.
Market research firm JD Power said discounts on light-duty pickups last month averaged $5,250, 11 percent higher than the year-todate average of $4,726.
In June, according to an analysis by Cox Automotive Rates & Incentives, each of the Detroit Three offered significant guaranteed cash incentives to help move their full-size pickups. Ram led with an average guaranteed cash incentive of $4,198. Ford’s average guaranteed cash is lowest at $2,412, and Chevy is in the middle at $3,377 on the Silverado.
The Cox analysis shows Ford and Ram offering slightly less than they did in June 2018. But Chevrolet nearly doubled the amount of guaranteed cash offered compared with June of last year.
But Ram is not letting up, said Cox, which reported that during the lead-up to the long Fourth of July weekend, Ram has been offering aggressive deals of 15 percent to 20 percent of the sticker price on pickups. Until now, only GM brands were focused on percentage off sticker-type deals, said Cox analysts.
Pickup sales are crucial for the Detroit automakers. GM, for example, needs to deliver about $10 billion in free cash flow, a measure of how much cash GM generates after accounting for capital expenditures, in the remaining quarters to hit its full-year target. That’s challenging as consumer demand sputters and sales are plummeting in China, the world’s largest car market.
Analysts say throwing too much cash on the hood to chase a sales ranking is less important than maintaining profit margins.
“It is not crucial for Silverado to be No. 2,” said AutoTrader’s Krebs. “What is crucial is for GM to make as much profit as possible on its pickup trucks as it invests in future technologies like electric vehicles, autonomous vehicles and mobility services. Today’s sales and profits will fuel the future and GM has aggressive plans.”