Doubts surround success of GM’s Chevrolet Colorado, GMC Canyon

Article by Christian A., on April 28, 2015

The return of General Motors to offering smaller pickups in the U.S. has revived a declining market segment but it appears now that its new trucks are hurting sales of its higher-priced models. The Chevrolet Colorado and GMC Canyon were launched last autumn. Since then, the midsize pickup segment has increased from 1.4% last summer to over 2% of the total U.S. car and light truck market.

According to some industry officials, the segment may double the annual sales to 500,000 units, which would have made up 3% of the market last year. IHS Automotive analyst Tom Libby said that there are less positive trends that come with the growing figures for the Colorado and Canyon. GM cars and trucks make up 9 of the top 10 formerly owned by those who buy the Colorado and Canyon.

IHS data show that those who own full-size Chevrolet Silverado and GMC Sierra trucks account for over 16% of the buyers who switched into both smaller GM pickups. Libby said that these data are “ominous” and that there could be a deeper problem related to the possibility of affecting the sales of higher-margin models.

Libby said that the new midsized trucks are still so new and there are just a small number of those who switched from other GM models. GM executives explain that IHS data doesn’t consider new buyers. Canyon marketing manager Kenn Bakowski claims that over 50% of the sales of the new trucks are buyers who are new to GM.

The new trucks of GM have taken away some of the share of Toyota Motor Corp's Tacoma, which has led sales in the midsized pickup segment. GM President Dan Ammann last month referred to the smaller trucks as "a very good investment." In an interview, GMC's director of marketing Rich Latek described this segment as a “sleeper” that represents big opportunities.

Because demand has been so strong, a third shift was added to GM’s plant in Wentzville, Missouri. GM intends to launch a diesel variant to expand the lineup’s appeal. GM executives consider the Colorado and the Canyon as one leg of a “three-truck strategy.” The others are the bigger and more expensive heavy-duty versions of the Silverado and Sierra trucks.

Just like the Toyota Tacoma, GM is targeting the Colorado and Canyon at buyers who want the pickup for its utility but leans more towards recreation like carrying camping gear and bikes rather than hauling oil field gear or lumber. The starting price of the Colorado is about $20,120, making it around $6,000 lower than the bigger Silverado pickup.

GM dealers have expressed glee about the new trucks, saying that they came at the right time, according to AutoNation Inc Chief Executive Mike Jackson. GM said that it’s not yet clear if demand will exceed the 1986 peak, which is when about 9% of the market was made of smaller pickups, with over 1.4 million units sold.

Analysts said that midsized trucks provide lower than the $10,000-$12,000 in profit for each unit of the full-size models. However, GM executives claim that that they’re money-makers and a part of their strategy to attain 10% profit margins in North America. From the launch last fall through March, GM has sold 37,351 Colorado and Canyon trucks.

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