The redesigned 2014 Chevy Silverado pickup -- and its close relative, the GMC Sierra -- were supposed to be game changers for General Motors (NYSE: GM ) . The pickup segment is one of the most profitable parts of the auto market, and these two vehicles were meant to help GM grab a bigger portion of that profit, through higher sales and higher average selling prices.
So far, GM has made good progress on the second goal; Silverado trucks are selling at higher prices than ever before. However, in the long-running market share battle between Silverado and Ford's (NYSE: F ) F-150 pickup, Chevy seems to be losing ground.
In September, GM suffered a rare decline in Silverado sales, which fell more than 10% year over year, from 36,425 in September 2012 to 32,506 last month. GM blamed the drop partially on a calendar shift -- September had 25 selling days last year, but only 23 selling days this year. However, Ford faced the same headwind, and still managed to grow F-Series sales by nearly 10% year over year, to 60,456.
As my colleague John Rosevear recently explained, part of the problem with GM's pickup sales may be inventory constraints. GM is nearing the end of a complex transition from its previous generation of pickups to the new 2014 models, and there have apparently been some supply hiccups along the way.
As a result, GM has not been able to completely meet dealer orders for pickups equipped with the 5.3-liter V-8 engine -- the most popular option -- according to a recent Bloomberg report. That said, GM has downplayed the impact of these inventory constraints, claiming that it has been able to fulfill 80% of dealer orders.
GM executives took a similar tack on the company's sales call this week. Don Johnson, VP of sales and service for Chevrolet, stated that dealers had a good supply of crew-cab pickups, which usually amount to 60% of sales. On the other hand, Kurt McNeil, VP of sales for the U.S., stated that dealers were still "building" stock of the cheaper regular cab and double cab models.
What's going on here?
It's clear that there are some supply constraints affecting sales of the 2014 Chevy Silverado (and to a lesser extent, the GMC Sierra). However, if supply constraints were the only factor holding back sales, GM executives would probably have said so.
Moreover, this is the second month that that GM has ceded pickup market share to Ford. Through July, the Silverado had gained ground on Ford, with sales up 27.4% year to date, versus a 22.1% gain for the F-150. Ford made up almost all of that ground in August and September; F-150 sales are now up 20.7% year to date, versus a 21% gain for the Silverado (and a 20.9% gain for Sierra).
Foolish bottom line
GM needs the 2014 Chevy Silverado to succeed; it competes in a high-margin, high-volume market segment. Moreover, time is not necessarily on GM's side. Ford is expected to release a redesigned F-150 pickup next year, which will almost certainly deliver big fuel economy gains compared to the previous model.
So far, the new pickups have boosted GM's selling prices -- which should be good for margins -- but not its market share. One potential reason is that GM dealers are having trouble competing on price with Ford and Ram dealers, who are offering discounts in order to clear their stock of older 2013 models.
If that's the real reason that GM's new pickups are having trouble, then the Silverado and Sierra should start regaining market share within the next couple of months, as Ford and Ram dealers transition to selling their own 2014 models. On the other hand, if GM's market share does not improve by then, GM investors will have to consider the possibility that they are betting on the wrong horse.
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