The 2014 Chevy Silverado Is Running Out of Time

In March, General Motors (NYSE: GM  ) finally ended its dismal streak of three straight months of declining Chevy Silverado sales. The 2014 Chevy Silverado was supposed to help GM retake market share it had lost to Ford Motor's (NYSE: F  ) F-Series trucks in the last five to six years.

Instead, while GM's attempt to boost profitability has been successful -- average transaction prices are up and incentives are down -- the new Silverado has not narrowed the sales gap with Ford. Furthermore, GM's new focus on pricing integrity allowed Fiat Chrysler (NASDAQOTH: FIATY  ) to swoop in and gain share among cost-conscious buyers with the Ram pickup.

The 2014 Chevy Silverado has commanded high prices but sales volume has been light. (Photo: GM)

GM's ongoing market share loss to its two top competitors in the pickup market caused analysts at Barclays to call the 2014 Chevy Silverado launch "arguably the least successful large pickup launch over the last 15 years." GM can still turn things around if it can find the right balance of incentives to boost sales without torpedoing profit margins. However, it's running out of time.

Sales bounce back in March
In March, the 2014 Chevy Silverado gained ground on Ford's F-Series trucks for the first time since its introduction. While F-Series sales increased 5.1% last month, Silverado sales grew 6.8% overall and 14% at retail. Growth was even stronger for the Silverado's corporate twin, the GMC Sierra.

That said, the combined Silverado and Sierra sales tally of 59,110 for March still lagged Ford's F-Series sales by 17%. Moreover, through the first three months of 2014, combined Silverado and Sierra sales are down nearly 5%, while F-Series sales are up 2.7%. Ford is clearly still the king of the hill.

Ford's F-Series trucks still dominate the pickup market. (Photo: Ford)

An even more disturbing trend for GM executives is the Silverado's loss of market share to Ram. Ram has posted consistently strong sales gains throughout 2014, with sales up 25% through March.

Last month, Fiat Chrysler boosted Ram 1500 incentives to $5,598 per truck, according to J.D. Power: nearly 50% higher than GM's incentives on the 2014 Chevy Silverado. This helped Ram outsell Chevy's Silverado for the first time since 1999!

GM isn't abandoning the low end
GM initially brushed off Ram's strong performance. One GM spokesman said, "It's really easy to deeply discount your truck, mine the subprime market and offer cheap deals to buy market share."

However, given that pickup trucks have very high margins, Fiat Chrysler may be perfectly happy to give up some margin on each vehicle in order to gain market share. Even with incentives averaging $5,600, the company will earn plenty of profit on each truck it sells.

Ram market share has surged 25% this year due to generous discounting. (Photo: The Motley Fool)

GM therefore needs a strategy to compete with Ram even if the latter keeps offering big discounts. It looks like GM will boost incentives on the 2014 Chevy Silverado in April by rolling forward the March promotions and adding $1,000 of bonus cash for certain models. GM is also offering extremely low lease rates in some parts of the country.

However, discounting the Silverado to target price-conscious pickup buyers is not going to be a long-term strategy for GM. If the company wanted to do that, it wouldn't be bringing back the Chevy Colorado and GMC Canyon mid-size pickups. When the Colorado and Canyon return this fall, they will claim the entry-level position in GM's truck hierarchy.

Running out of time at the high end
The 2014 Chevy Silverado's true purpose is to compete with Ford's F-Series trucks for buyers who are willing to spend for a highly capable truck -- not to battle Ram for market share among price-sensitive customers. However, GM is running out of time to reclaim market share from Ford.

This fall, Ford is rolling out a brand-new F-150. The next-generation F-Series trucks are incorporating significantly more aluminum in the body, which will probably lead to much higher fuel efficiency while also increasing towing capacity.

The 2014 Chevy Silverado will look less appealing when it faces Ford's new F-Series trucks. (Photo: GM)

GM is reportedly planning to introduce an aluminum-body Silverado in the fall of 2018 -- but that's a long time from now. Ford's multi-year technological lead will allow it to further solidify its leading position in the pickup market once the new F-Series trucks reach healthy stock levels next year. For the 2014 Chevy Silverado, there's no time like the present to battle Ford for high-end market share.

Foolish bottom line
Since the 2014 Chevy Silverado's introduction last year, GM has continued to lose pickup market share, although it has benefited from significantly higher average transaction prices. However, Ford's new F-Series trucks are coming this fall, and they will bring significant technological advancements that GM won't be able to match for several years.

As a result, the Silverado will be squeezed from both ends. Truck buyers with more money to spare will probably prefer Ford's more capable truck. Truck buyers on a tight budget will gravitate toward heavily discounted Ram trucks or GM's new mid-size pickups. If GM wants to restore the Silverado to its former glory, it needs to move fast.

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Read/Post Comments (13) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 07, 2014, at 12:46 PM, ejazz2095 wrote:

    GM playing catch up, sounds like business as usual.

  • Report this Comment On April 07, 2014, at 4:46 PM, LouisTewl wrote:

    This excerpt from The Wall Street Cheat Sheet article

    >"According to reports, it’s now Chevy’s turn to wheel out the incentives and snatch back sales from Ram in April. To pull off this feat, Auto News reports regional GM managers are offering down payments that are $1,000 lower than Ram accepts and are nearly matching the monthly cost of Ram ownership to get prospective buyers in a Silverado.<"

  • Report this Comment On April 07, 2014, at 5:21 PM, mrgreenjeans wrote:

    the new Silverado is a warmed over version of the previous year with a higher price tagged No-thanks they can keep them

  • Report this Comment On April 07, 2014, at 9:33 PM, blindchevy wrote:

    My new Chevy can't get out of the way of itself. The mileage hasn't come close to the advertised mpg's. The transmission is constantly shifting (and not sounding very healthy doing it). The comfort level is fair at best. I bought it as a faithful Chevy owner.--- not ever again!

  • Report this Comment On April 07, 2014, at 10:54 PM, bcweir wrote:

    What the 2014 Silverado and Sierra really need is emergency cosmetic surgery. Compared to either the 2009 - 2014 F-150, the new upcoming 2015 F-150, or ANY of the current RAM models, the GM trucks are frightening off new buyers with a mirror-shattering case of the Uglies.

    Forget the bribes -- oh excuse me - incentives.

    The 2014 GM trucks are the New Coke.

  • Report this Comment On April 07, 2014, at 11:55 PM, dieseldvm wrote:

    gm likes to take baby steps. problem is ram and ford are taking big steps. fords aluminum direction is probably a good move for some economy and corrosion protection gains. their lack of a fuel efficient diesel will hinder them. ram most innovative with ecodiesel and 8 spd auto but still needs to work on quality. gm quality making good strides but engineering not moving fast enough, (no half ton diesel or 8 spd). gm's half tons not much to look at either. give gm credit for midsize pickup reintroductions. colorado/canyon awesome. looking forward to 4 cyl diesel, still need an 8 spd.

  • Report this Comment On April 08, 2014, at 7:55 AM, AcuraT wrote:

    "This fall, Ford is rolling out a brand-new F-150. The next-generation F-Series trucks are incorporating significantly more aluminum in the body, which will probably lead to much higher fuel efficiency while also increasing towing capacity."

    Nice how the mention the advantages. What about the disadvantages? If in a car accident, who is going to fix the aluminum body - not your traditional body shop - that is for sure! Also, the difficulty in fixing aluminum is documented - those that take it on the labor costs are going to be much higher to fix. In the end, trucks from Ford maybe totaled more often in accidents than the other two brands if these two things are not overcome. Only time will tell if that will happen. I do not plan to be an experiment - I will let others try that one.

  • Report this Comment On April 08, 2014, at 10:21 AM, ponchoman49 wrote:

    I'm going to laugh at all the morons with there costly aluminum bodied F-150's and troublesome Ecoboost engines when the warranties run out and or body work is ever needed. Also expect higher insurance rates for the Ford, higher transaction prices, greater complexity and continued low rankings in consumer magazines for reliability as with there current lineup. Every person I know that owns an Ecoboost Ford has been in the shop for fires, recalls, poor mileage, drive-ability concerns and even engine failure!

    So before all the red necks start the usual GM hate stop and consider who makes the better truck here!

  • Report this Comment On April 08, 2014, at 10:39 AM, Mike8844 wrote:

    GMC has the best looking 1/2 ton on the market. While Ford is convincing / deceiving people that they are cutting edge they currently sell a truck that is so poorly built that when you close the door the entire truck shutters. Windows up and slam that door? Your head may explode from the shudder.

    Cheap buyers will buy the cheap truck.

    Good luck with the aluminum body F150. Sure, it won't rust. It will oxidize and corrode though, just look at the current Expedition and all the issues they're having with their aluminum panels.

  • Report this Comment On April 08, 2014, at 2:07 PM, PS75425 wrote:

    Doesn't sound like rocket-science to me .... 1) lower prices across the board on GM PU trucks; 2) maybe de-content some of them; not sure everybody wants a "luxury car" masquerading as a truck???

  • Report this Comment On April 08, 2014, at 4:42 PM, dylan345 wrote:

    Funny how gm people try to go after the f150. Why hate we've been dominating the market for years and will continue to do so. If a product is junk it don't sell, you say the f150 is crap then why do we kill everybody else in sales. And mi d u we don't have to lower are prices like the competition. And rip on the aluminum body but isn't that what gm is going to in 2018 yes it is and there behind the best again. GM always plays second and thanks to great huge recalls that's going to tear them further down might be playing third soon.

  • Report this Comment On April 08, 2014, at 4:45 PM, dylan345 wrote:

    Just like the Bradleys and abrams tanks which are made from 80% high grade aluminum.

  • Report this Comment On April 09, 2014, at 8:42 AM, Rolland wrote:

    I don't think you can say it isn't the nicest looking pickup out there. But it is a bit the same however from the last. Time to twist and bend the sheet metal a little more. Don't worry Ford we are coming to get you!

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Adam Levine-Weinberg

Adam Levine-Weinberg is a senior Industrials/Consumer Goods specialist with The Motley Fool. He is an avid stock-market watcher and a value investor at heart. He primarily covers airline, auto, retail, and tech stocks. Follow him on Twitter for the latest news and commentary on the airline industry!

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