The automotive industry has been divided when it comes to the midsize truck segment. Ford Motor Co. and Fiat Chrysler Automobiles respectively discontinued the Ranger and Dodge Dakota, while Toyota Motors and Nissan continue to sell the Tacoma and Frontier. General Motors initially followed its Detroit rivals before flip-flopping and recently bringing back the Chevrolet Colorado and GMC Canyon.
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One thing is clear: GM believes it made the correct strategic decision and its marketing team is in full spin mode. Let's look at a few recent claims from GM and put some much-needed context around the arguments.
Infographic source: General Motors.
"Six months into its launch, the Chevrolet Colorado is the industry's fastest-selling pickup, regardless of brand or model year," said Kurt McNeil, GM U.S. vice president of sales operations, in a press release.
Now, I've seen some rebuttals commenting that the Colorado's 344% increase in sales from October to March isn't a fair comparison to, say, Ford's F-Series, which would have to move from 62,000 to more than a quarter-million vehicles sold to match the Colorado as "fastest-selling pickup"-- impossible for an automaker to do from such a large starting sales base.
However, that's not what GM meant by "fastest-selling pickup." General Motors is referencing days spent on dealer lots before being sold, which was 16 days in the first quarter. That's only about two days faster than Ford's 2015 F-Series, and is almost an entirely irrelevant statistic for new models.
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Furthermore, let's look at how the previous six months of Colorado sales stack up against the segment leader, Toyota's Tacoma.
Chart by author. Information source: GoodCarBadCar.net.
Not only does that add some important total sales context, it also shows the Tacoma is increasing its sales at a faster clip year to date. What's more important to investors, the amount of time vehicles spend on dealership lots or how rapidly total sales are increasing? General Motors is emphasizing the former, but in my opinion it's clearly the latter.
GM's 2015 Chevy Colorado hopes to challenge the Tacoma in sales. Image source: General Motors.
Next up is GM's boast that 53% of Colorado consumers are new to Chevrolet. Taken at face value this is an impressive statistic because that's a high conquest rate. However, without context, we have to take it with a grain of salt. The automaker doesn't mention if these are conquests directly from midsize truck competition, namely Toyota and Nissan. Nor does GM clarify if that 53% of new Chevrolet consumers includes defectors from the GMC brand, which could mean some full-size Sierra customers are stepping down -- which is a bad development, in terms of profitability.
Why it matters for investors
It's necessary to put context around these claims because automotive investors hear 24/7 that full-size trucks are the most profitable segment in the U.S. market. That means if you sell trucks well, your company has more potential than the next guy that can't sell trucks well. If Chevy's recently returned Colorado is indeed reinvigorating the midsize truck market, investors might believe it's more valuable than it really is. There is a huge difference, though, between full-size trucks and midsize trucks. For one, look at the difference in sales.
Chart by author. Information source: GoodCarBadCar.net
Also, because midsize trucks are less expensive, the revenue and margins generated will be lower than for than full-size trucks. Now, this isn't to say the Chevy Colorado isn't valuable, it certainly is. It's just important for investors to understand the difference between "reinvigorating" the midsize market and ruling the full-size market, as Ford's F-150 does.
Maybe I'm being unfair to GM's midsize Colorado -- which for the record was named 2015 Motor Trend Truck of the Year and Cars.com's Best Pickup Truck of 2015, and seems to be a solid product -- but, some of these claims are clearly marketing spin and should be considered skeptically.
It will be a while before we can truly understand if GM's return to the midsize truck segment is truly reinvigorating the segment and just how valuable it is; chances are, we'll have to do some extra homework to add context to the claims.
The article Why We Should Take General Motors' Recent Claims With a Grain of Salt originally appeared on Fool.com.
Daniel Miller owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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