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GM boosts incentives to fight the intensifying price war

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GM boosts incentives to fight the intensifying price war

GM boosts incentives to fight the intensifying price war

This month, General Motors boosted its incentives on its pickup model vehicles, after its biggest foe gained ground, intensifying the price war within the U.S. auto market.

The average discount for the Chevrolet Silverado was $6,996 and about $5,315 for the GMC Sierra this month through March 12, according to J.D. Power dealer data obtained by Bloomberg News.

The incentives on GM’s models increased about 56 percent and 82 percent from the previous year. The incentives surged as Fiat Chrysler Automobiles and Ford Moto Co. dialed back their spending, according to the researcher.

The pickup segment of the auto market is the most profitable within the global automotive industry. The profitability gives carmakers the room to offer deals and motivation to make market-share grabs. However, intense brand loyalty among truck owners means that automakers must offer bigger deals to entice the buyer to switch models.

The rise in incentive activity reflects that the U.S. auto market has started slowing down, following a seven-year streak of expansion.

“It’s taking a lot more incentives now to move the metal than it did last year or certainly the year before,” said Michelle Krebs, senior analyst with car-shopping website Autotrader.com. “Things are slowing.”

The incentive deals from GM are part of a “Truck Month” promotion that includes offers for about 25 percent off the sticker price of some 2016 Sierra pickups. The deals also offer $11,185 discounts for select 2017 Silverado models.

The offers come after a sales decline in January on both of GM’s full-size truck models, while Ford and Fiat Chrysler’s pickups gained.

“Last month, GM’s pickup sales were down,” Frank Ursomarso, owner of Union Park GMC in Delaware, said in a phone interview. “That’s why they’re doing this. GM has to battle against Ram and Ford.”

The automaker also lost sales ground in 2016. GM’s deliveries dropped 4.3 percent for the Silverado and 1.1 percent for the Sierra in 2016.

Jim Cain, a GM spokesman, said the automaker is responding to competitive pressures with its latest incentives.

“We wanted to get our fair share in the truck market,” Cain said by phone. “The kind of incentives we offer in Truck Month are not the kind of spending we do a on a regular basis.”

Analysts have estimated that pickups can command $8,000 to $10,000 in gross profit per vehicle, which generates most of GM, Ford and Fiat Chrysler’s earnings.

“If this level of incentives continues, it certainly will eat into profits,” Krebs said.

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