GMC: The Quiet Leader of GM’s Recent Success

Source: GMC

Over the last few years, General Motors has sunk an enormous amount of money into overhauling its Chevrolet and Cadillac brands. Those efforts have been met with great success, and Buick, which has historically been one of GM’s smaller brands, has had it better now than in many, many years past. However, it’s GMC — perhaps General Motors’ most low-profile brand — that’s setting the pace for the company.

Five years after the conglomerate declared bankruptcy, it’s been GMC, which specializes specifically in SUVs and trucks, that has remained the healthiest, Automotive News reports. GMC has “out-gained” Chevrolet in market share since 2009 despite working with a fraction of the latter’s advertising budget. The high-end Denali trim has managed to outsell entire lineups from Lincoln, Jaguar, and Land Rover, all while giving GM the benefit of larger margins and higher transaction prices.

Like Cadillac, GMC has been the subject of criticisms in years past as being little more than badge-engineered Chevrolets. However, the marque has been establishing itself as a separate entity recently, commanding near-Cadillac like prices and making the limited but successful luxury truck market its own.

“We think of GMC as a niche brand for a very specific consumer mindset,” Roger McCormack, GMC marketing director, told Automotive News. “But it’s a 450,000-unit niche of profitable truck business.”

John Wolkonowicz, an independent analyst and automotive historian, told Automotive News that GMC has long served as a cushion on General Motors’ bottom line over its 102-year history, offering vehicles built on Chevy platforms at a higher price. Until the early 1970s, the higher prices were justified by better powertrains and features not found in the Chevys, but new cost-cutting measures introduced around that time led to a near-complete homogenization between the two nameplates, according to him. It was so bad, Automotive News writes, that as late as 1999, GMC was selling the Chevrolet Suburban as the GMC Suburban. The Yukon name was introduced the following year.

Source: GMC

Since then, GMC has diverged in its offerings to help set the brand apart. Now, the vehicles it offers barely resemble their Chevrolet counterparts on the surface: the Terrain hardly looks like the Equinox, the Acadia looks dramatically different from the Traverse, and even the Sierra is now comfortably distanced from the Silverado.

It turns out that appearance is key for GMC’s success, as most buyers cite physical looks as their No. 1 or 2 reason for buying one over another General Motors brand. “The people who buy GMCs are convinced they’re getting something special, even though there isn’t much difference from the Chevy beyond styling,” Wolkonowicz said to Automotive News.

Since the late ’90s, GMC has diverged enough from Chevrolet that it’s more of a threat to Cadillac. Helen Emsley, the executive director of global GMC design, said this was a particular problem when she pitched installing real wood interior trim into the 2015 model year Yukon and Yukon XL Denali. “Everybody told me, ‘Oh you can’t do that. That’s an Escalade thing,’” she told Automotive News. “I said, ‘No. These owners expect craftsmanship, real materials, a hand-stitched look.’ We fought for it, and we got it.”

As it turns out, the Denali trims have been the spearhead of sales growth. It offers the more powerful 6.2 liter V8 (over the standard 5.3 liter), as well as a more finely crafted interior, more tech, and more gadgets. It accounted for about 20 percent of GMC’s 450,901 unit sales last year, Automotive News reports.

Source: GMC

The more upscale Denali also unsurprisingly attracts a higher-income demographic. Households opting for the Yukon XL Denali trimmed vehicles generally have a combined annual income of $188,000, whereas non-Denali Yukon XLs go to households with a combined income of $134,000, on average. The average transaction price is about $68,000 — approaching Cadillac territory. However, there’s a good reason that these buyers shoot for the GMC over the Caddy: “They don’t want to be seen as flashy,” Emsley said, per Automotive News.

“In the context of high-dollar SUVs, GMC flies under the radar, and so do their buyers,” IHS Automotive analyst Stephanie Brinley told Automotive News. The devoted following of Denali buyers in particular leads to plenty of word-of-mouth advertising, she says. A big advertising push could be a turnoff, the publication added.

Since 2009, transaction prices for GMC rose 12 percent, from $35,915 to $40,099 in 2014, according to data supplied to Automotive News by TrueCar. Cadillac, meanwhile, saw a decline in transaction prices from $50,307 to $48,177, a drop of 4 percent. This can be at least partially — if not entirely — attributed to the new $33,000 ATS entry-level sedan that wasn’t around before last year. GMC’s average transaction price could take a hit later this year with the introduction of the new Canyon small pickup, but that’s to be expected, and it’s likely that the Canyon will prove to be quite popular.

General Motors is still exploring the potential for GMC; product chief Mark Reuss called GMC’s brand image “astonishingly strong,” according to Automotive News. He has suggested a standalone GMC vehicle that wouldn’t share its underpinnings with a Chevy, but should it materialize, it would likely remain close to GMC’s SUV and truck roots. 

“The consumer sentiment is there. Denali has become iconic,” GMC’s new sales chief, Duncan Aldred, told Automotive News. “We can take this brand wherever we’re brave enough to take it.”