GM’s December Big SUV Gambit

December is several things. The start of winter, holidays and year-end incentives to push those sales numbers closer to, or beyond targets. What it’s generally not, is a time for automakers to introduce new products. 

So when General Motors unveiled the 2021 Chevrolet Suburban and Tahoe large SUVs earlier this month it may have appeared to be a crazy strategy. Crazy like a fox. It turns out December is precisely the right time to promote an upcoming redesigned, improved line of big SUVs in order to pique interest in what’s on sale now, according to the top numbers cruncher at auto shopping research website CarGurus.com.

“While not all of the country will be covered in snow and thinking about SUVs this time of the year enough of the country is thinking about it and we’re seeing higher incentives spending in December on large SUVs so the timing is just all right for this type of announcement,” said George Augustaitis, Director of Automotive Analytics at CarGurus.com. 

Looking further at the numbers, Augustaitis points out the total large SUV share of sales and lead data on CarGurus has peaked in December every year between 2014 and 2018 meaning interest by consumers in researching and submitting interest in purchasing such vehicles. That interest, he says, has a direct correlation with actual sales, pointing out, “we can see that the total large SUV share of monthly sales also peaks in December every year.”

For Suburban and Tahoe, a good year-end boost fueled by incentives and increased interest would be welcome. In the third quarter, sales of Suburban and Tahoe were down 20.4% and 9.1% respectively. Through the first nine months of 2019, Suburban sales were down 8.2% and Tahoe was off 0.8%. GM only releases sales data quarterly. 

An early unveiling of new versions of vehicles struggling to the finish line might seem counterproductive, leaving customers to simply wait for the improved models to arrive. But Augustaitis contends, that’s not always the case, explaining, “an announcement like this feeds the upper funnel, and while you will have some consumers wait you also are going to drive some people to the market just to see what the current vehicles are like.”

There’s a leap between seeing what the current vehicles are like and actually buying one but the continuing high level of incentives are expected to give consumers the push to make that leap, especially in the case of expensive large SUVs.  

An analysis by Cox Automotive reported incentives averaged 10.72% of transaction prices through November, calling 10% “a typical tripwire for excessive incentives spending…these new levels near 11% of ATP may now be the new norm.”

In real numbers, ALG, a subsidiary of TrueCar, reported average incentives at the beginning of November among the 12 largest manufacturers was $3,759. However, GM surpassed that putting an average of $4,713 on the hoods of its vehicles, accounting for of 12.3% of average transaction prices. That’s taking all price levels into account. In the case of a Suburban, for instance, with an average transaction price of $61,246, 12.3% would represent a hefty $7,533 discount beyond what other price breaks the customer is able to negotiate with the dealer. 

CarGurus’s George Augustaitis figures the large SUV segment is almost saturated, surmising, “I definitely think there’s space for one more but I don’t know how many more vehicles outside of that we’re going to be able to see in the segment where there’s enough demand to spread around.” 

But more competition means more pressure for automakers to offer cash to close the deal, especially on high-profit large SUVs. If that happens, Augustaitis predicts, “we would see a lot of incentives battling.” 

However high incentive levels are it’s still better to move the metal than let it fester unsold on dealer lots. So by promoting its upcoming new models now and sparking news coverage and attention to Suburban and Tahoe, GM’s move may result in renewed interest in current models and using cash on their considerably large hoods to close some much-needed year end sales.