You must have missed all the reporting of the last couple years. The industry narrative now is to push ATP and GP higher, ever higher. GM apparently failed to do that. Even though revenue is higher than last year, margin fell.
Look at how the rate of ATP escalation increase over the last two years in the chart in this article. There is a second bar graph that shows GM’s y/y price increase at only 3.4%, vs 8.4% at Ford and 8.5% at Strabismus. Daimler and VW are the worst gougers, up over 15% y/y. Clearly, GM isn’t gouging it’s customers enough to meet the market’s expectations for the industry.
Tuesday July 12, 2022
New-Vehicle Prices Set a Record in June, According to Kelley Blue Book, as Luxury Share Hits New High
Manufacturers are free to charge whatever price they want, whether or not you call it “gouging.” And customers are free to NOT pay prices they don’t like. There are many, many alternatives to buying a new car with a high price. That’s price elasticity.
Manufacturers are free to charge whatever price they want, whether or not you call it “gouging.” And customers are free to NOT pay prices they don’t like.
What is novel is the automakers profess to no longer care about volume. If their sales fall by large amounts, they don’t care, as long as they can push ATP and GP per car ever higher.
Volkswagen is one of the steepest gougers in that article, y/y price increase over 15%. What does the VW CFO say?
“The key target is not growth,” Arno Antlitz told the Financial Times newspaper. “We are (more focused) on quality and on margins, rather than on volume and market share.”
The paper said VW’s new strategy was a sign of profound changes in the auto sector, which has attempted for decades to increase profits by selling more cars each year, even if that required heavy discounting.
So, as the companies continue to cherry pick the most profitable models, in the most profitable markets, and dump the rest, they don’t seem to be concerned about having fewer examples to amortize costs over, nor being agile in the market should consumer preference change. They trained the stock market to only look at ATP and GP, and they will ride their narrow, profit optimized, product line, until it’s rejected by consumers, and then cry to the government for another bailout.
Wendy (MBA, Marketing)
Steve (MBA Management, before B-schools went all in on analytics)
One local dealer is getting Chevy Malibu - $25,000 car…not much more than a few years ago…probably will sell for a bit more… but $25000 is the MSRP.
One local dealer is getting Chevy Malibu - $25,000 car…not much more than a few years ago…probably will sell for a bit more… but $25000 is the MSRP.
Happenings at GM are local news for me. Tonight’s local news covered their earnings report. Mary Barra said they are selling every car they can build. They have thousands of cars in storage lots waiting for a backordered part to come in so they can be delivered to customers. Clearly, with people waiting for every car they can get off the line, they could have increased prices to a “market clearing” level, like the other automakers. As an example the VW Taos has a base price under $24K. Try to find one for less than $30K, because they are only building ones that are heavily optioned, and, as auto journos who tested the Taos commented, the options are really expensive. Blind spot monitor is supposed to be standard on all trims of the VW Tiguan, but, if you try to buy a low trim Tiguan, you will find a credit on the window sticker for the BSM not being installed. If you want BSM on a Tiguan, you need to koff up for the top of the tine trim, because those are the only ones they are installing the feature on as an inducement for people to buy the higher trim. VW is one of the biggest gougers.
It seems that GM, and WalMart, are more ethical that the Shiny norm, in that they are taking a hit to their bottom line, and stock price, rather than leverage the “shortage” hysteria to gouge customers.