A Smarter GM: It's Better Than Toyota at Moving Out Old Models
General Motors is tweaking its sales incentives to stay ahead of the curve this year to get rid of its 2010 models and make room for 2011s -â€" more so than Toyota (TM) which is still getting most of its sales from 2010s, according to Edmunds.com, the auto shopping and research web site.
That's important from a consumer point of view, because the sooner a car company runs out of "old" inventory, the sooner it can dial back on the good deals it needed to get rid of the leftover models. What's bad new for consumers -- fewer good deals -- is good news from a profitability standpoint for the car companies.
Oct. 1 was the start of the traditional model year. That's an old-fashioned concept, because the car companies nowadays tend to scatter new-car introductions practically all year round. However, the fall is still the busiest time for model-year changeovers, and this is still the right time of year to assess how the all-important transition is going.
It's crucial to strike the right balance between old and new model years. The worst-case scenario is to have too many cars from the expiring model year. GM found itself in that position in the summer and fall of 2005. For tactical reasons, GM offered Employee Pricing for Everyone back then to clear out its inventory.
The offer was a surprise hit. It forced competitors to follow suit, and produced a huge spike in sales. GM was riding high for a while, but in retrospect, Employee Pricing only postponed GM's ultimate bankruptcy last year, along with Chrysler.
This year, according to Edmunds.com, GM is more discriminating in its incentives. For instance, some 2010 models get zero-percent financing up to 72 months; the same model for 2011 only gets zero percent for 36 months. That yields a much higher monthly payment for the 2011 model.
Having sold down a lot of its leftover inventory, GM got only 48 percent of its September sales from 2010 models. The industry average was 64 percent. There's an obvious positive impact in terms of incentives. Edmunds.com said that for the whole industry, not just GM, 2011 models had an average incentive of $1,704 in Septmeber, while 2010 models carried an average discount of $3,021.
Toyota was just above the industry average in terms of 2010 inventory, according to Edmunds.com. Toyota got 66 percent of its September sales from 2010 models. On the plus side, the average incentive for Toyota was still more than $1,000 lower than GM, even though its incentives are higher than they were a year ago. Toyota averaged $2,212 per vehicle in September, up from $1,515 in September 2009, Edmunds.com said.
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