27 July 2007

GM 'Tactically Targets' Their Customers- 0% Financing On Trucks

On July 9th, we read this-

GM sales manager Paul Ballew said last week that the auto maker would evaluate its discounts on trucks after a down June and competitors "flailing away" on incentive spending. Toyota was offering 0% financing for 60 months or more than $3,000 in discounts on its new Tundra pickup truck.

Despite the adjustment, GM said it will stick to its incentive strategy and use targeted, tactical deals.
Now, just 2 weeks later, it looks like GM is on the verge of unveiling their 'targeted, tactical deals'- 0% financing over 60 months until the end of August.

Well, that certainly sounds targeted. Targeted to the entire population of truck buyers in North America. And it's certainly a change of tactics from the usual, umm, 0% financing over 60 months, that they usually go with.

So, with about $3600 bucks on the hood of every Silverado and Sierra, GM is going to add 0% financing. Which will put them right around what Toyota is doing- about $4000 on the hood, and 0% financing over 60 months.

Dig a little deeper though, and you'll realize that Toyota is laughing all the way to the bank with this decision from GM. First and most importantly, it means that GM is going to go to war with them on price. That probably doesn't sound too good on the surface, but Toyota at present time has far deeper pockets than GM, so they can afford to take less profit on each truck, while GM can't. Second, the incentives picture is more muddy that it first looks- much of the Tundra incentives are on the hoods of base model stripper pickups- which were overpriced to begin with. So in essence, Toyota has applied big rebates to models that could absorb them, while continuing to sell their top end profit heavy models with far less in terms of customer give back. Lastly, the GMT900s are the bread and butter of the GM lineup- any profit taken off the table of these vehicles is a huge hit to GM- by forcing their hand, Toyota has succeeded, even if it results in a rebound in sales for the trucks.

There were worries before the launch of the Tundra that Toyota was going to price themselves out of the picture with their new truck. Instead, it seems like the spider has set a perfect web- one that they have all the resources in the world to entangle their prey in.

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