GM: Incentives Are Down, but Sales Are up

Is the 2014 Chevrolet Corvette Stingray the hottest new car in the world? Vette sales more than doubled in November. Photo credit: General Motors Co.

General Motors (GM -0.04%) reported today that its U.S. sales were up 14% in November, a strong result that exceeded most analysts' estimates. 

GM officials noted that the company's retail sales were up even more, 19%, last month. Gains were strong in segments across the market, as several of GM's new or recently refreshed models posted strong year-over-year increases.

Even better for GM -- and for GM shareholders -- the company is showing impressive discipline around incentives.

Discounts are down, but sales of key models were up
Every month, analysts at Edmunds.com calculate the "Total Cost of Incentives" for each of the major automakers. Edmunds' data shows that GM's average incentives were down significantly in October, to just $2,788 per vehicle. 

That's not just the lowest of the Detroit automakers, it's also lower than Nissan's -- and there's no evidence that GM's sales suffered.

Sales of GM's full-sized pickups, the Chevy Silverado and GMC Sierra, were together up about 15% over last year's disappointing totals. The pickup market is traditionally heavy with incentives, and while GM's incentives on its outgoing 2013 models remain high, they represent just a small portion of November's sales.

GM has been determined to get the best possible prices for its all-new 2014 Silverados and Sierras. It has stuck to its plan of limiting discounts on the all-new trucks, even while Ford (F 0.08%) continues to offer strong deals on its F-Series pickups. 

That's part of a larger strategy. GM CEO Dan Akerson is determined to boost GM's profit margins. Building appealing products and holding the line on discounts are two key parts of his approach.

Both appear to be going well for GM.

Big gains for new products, including the white-hot new Vette
Several of GM's recent products posted gaudy sales gains in November. Overall sales of the new Chevy Impala sedan were up 20%, and GM noted that the Impala's retail sales more than doubled -- a strong result for the new model. 

Sales of the just-refreshed Chevy Malibu were up 41%, as that model is finally gaining ground in the hot (and hotly contested) mid-sized sedan segment. 

Cadillac's XTS and ATS sedans, introduced last year, were up 41% and 60%. It was another strong showing for GM's luxury brand, another cornerstone of Akerson's plan to improve GM's profitability. Overall, Cadillac's sales are up 25% this year through November.

And while its total sales numbers are just a drop in GM's global bucket, in terms of attention and interest, it's possible that GM has the hottest new vehicle in the entire world right now with the 2014 Chevrolet Corvette Stingray. Vette sales were up 129% in November, with transaction prices in many cases well over GM's sticker prices.

The Corvette's sales numbers are small. Just 2,527 were sold last month. But "halo cars" like the new Vette often result in sales increases for other models, simply by drawing attention to the brand -- and curious car fans to Chevy showrooms.

Choosing profit margins over market share
Edmunds.com analyst Michelle Krebs has an interesting take on GM's pickup sales. She said that while the sales increase "looks good on the surface", she thinks it could have been better given the company's disappointing results last year. She thinks that with GM's incentives on the new trucks being so much lower than rivals', the company has "some wiggle room" to boost discounts in order to gain market share.

I think that's true, but I don't think it's what GM will do -- or what the company should do. I think GM's recent price discipline has been most impressive. Holding the line on discounts will have two good effects: It'll boost per-sale profits in the near term, and it'll help GM's resale values over time.

Both of those will be good for the company's bottom line, and for GM shareholders.