Over the last year or so, GM's spinmeisters have relied on fleet sales reduction as their number one excuse for declining sales and market share. Not to coin a phrase, the spin stops here. Speaking at the National Automobile Dealers Association (NADA) conference in Mean Old "Frisco, GM's Marketing Maven Mark LaNeve said he "does not foresee a further reduction in GM’s fleet sales." Ward's pegs GM's current fleet sales at "fewer than 600,000 units," which LaNeve defended as "very profitable now." Apparently, that's because GM lowered fleet volumes AND raised prices. LaNeve told the assembled dealers that the process was a bitch. "This was a tough conversation. We had to go to some of our best customers – these guys buy hundreds of thousands of vehicles at a time – and say, ‘we’re raising prices and you’ll probably get less.’" Note the word "probably." Wards reports "when it comes to hot-selling products, such as the redesigned ’08 Chevrolet Malibu, if retail sales are high enough, rental companies might not get the vehicle." Note the word "might." And also note the fact that TTAC readers have already reported seeing the new 'Bu on rental lots. In fact, I'm not sure I believe any of this.
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A post on another forum I frequent caused me to take stock of the new Malibus I’ve seen.
In the town in which I currently life, I’ve seen three: two were rentals (though I’ve spent the past two years working at two rental offices, neither was “ours”). One was a retail model on a test drive from the Chevrolet dealer.
I drove to Washington, DC, a few weeks back (about 3 hours away) and managed to see one on the highway. I don’t know if it was a rental or not, as it was heading in the other direction. So, one “maybe.”
I spent a week in Detroit for NAIAS, and counted three there, as well – astounding, as it’s logically enough the American car capital of the world (our rental ’07 Camry stood out starkly). Two were rentals, and one was a consumer-owned LTZ.
This doesn’t include the ones at the show.
So, in summation, I’ve seen two retail cars (one of which wasn’t even sold yet), four rentals, and one that could go either way.
Meanwhile, yesterday alone, I saw at least five new Accords, 0% of which were rentals.
This explains why GM’s January sales bucked the trend. Too bad they couldn’t say it when they do it. I’ll bet this coming year that GM’s going to stuff a lot of cars directly info fleets (in addition to what dealers sell to local fleets too).
Just because Honda doesn’t have ‘fleet’ sales, doesn’t mean they can’t end up on rental lots. It just means the rental companies have to pay full ‘retail’ price.
Higher resale value on a Honda would make up for the higher initial price paid.
Robert: I have NO issue with a FEW Malibu’s making it to daily rental. For once—GM can send even the cut-rate version of the Malibu to daily rental and showcase a highly competitive product.
Yup, saw the ‘bu at both the Phoenix and Atlanta airports in the past month.
SkiD666: Buying Hondas at full retail price would tend to take the negatives out of the equation re: fleet sales as practiced by GM, Ford and Chrysler which provide steep discounts based on higher volume orders.
So are we sure the new Malibu’s on rental lots weren’t bought at full retail, considering how short of supply there currently is.
SkiD666 :
February 11th, 2008 at 2:28 pm
So are we sure the new Malibu’s on rental lots weren’t bought at full retail, considering how short of supply there currently is.
Of course we aren’t positive, but there are several things that seem to disprove this as being likely. First, rental companies aren’t going to pay top-dollar because of “demand.” They’re going to see if you have a competitive price (this goes for manufacturers and dealers), and if not, they head down the road to the lowest bidder.
Second, the vast majority of non-Enterprise fleet cars come directly from manufacturers as part of “guaranteed buyback” plans – it’s sort of like a fleet lease. You get a mileage cap, an age cap, and set points along the fleet life of the car that have their own mileage limits. Hit any of these, and the car goes to a manufacturer-approved auction to be inspected by a manufacturer rep and then sold to a dealer – with the money going to the manufacturer. The other type of rental car is a “risk” car, where the rental company buys it fully from a dealer or manufacturer (this is how Enterprise operates, mostly with local dealers) and sells it on their own – thus, Enterprise’s constant parking of cars with big “BUY ME!!” signs on the windshields outside their offices. Avis/Budget, Hertz, National/Alamo, and the rest take the vast majority of their fleets from manufacturer buyback programs, and even the few risk cars are very seldom from local dealers (i.e., sales that could be counted as “retail” when they aren’t really). This is why you get more loaded models and widely varying nameplates at Enterprise than you do at any of the other major rental companies – more options means better resale (which is Enterprise’s responsibility then), and they’re widely varied because they find the low-ball local dealer and take whatever they can get.
SkiD666 :
February 11th, 2008 at 11:25 am
Just because Honda doesn’t have ‘fleet’ sales, doesn’t mean they can’t end up on rental lots. It just means the rental companies have to pay full ‘retail’ price.
Higher resale value on a Honda would make up for the higher initial price paid.
I realize this more than you know. I’ve worked in the rental car industry for two years, and have seen plenty of Accords (the run-out of the old model from July ’07 through the end of the year was monstrous – we saw more Accords at our offices locally than Malibus, G6s, or almost anything else). However, Honda does not have a guaranteed buyback program, and deals almost exclusively through local dealers. I assume Honda Corporate subsidizes these firesales by giving sustaining kickbacks to dealers for getting rid of excess inventory to rental fleets while still allowing them to count retail sales. It’s sort of cheating, really.