The week of August 26th was supposed to be a vacation for the Chevrolet Cruze plant in Lordstown, Ohio, but GM officials report that they have canceled the planned lull in production due to a recent spike in demand for the Cruze. Plant workers will be reporting to work as normal next week as GM continues to crank out the hot-selling sedan.
We know that Cruze sales have been good, but just how good? To get a better understanding, let’s take a quick look at the compact car segment performance of the Cruze along with two of its closest direct competitors, the Ford Focus and Honda Civic.
Looking at July new sales, Cruze deliveries crossed the 25k unit threshold as July sales increased by a hefty 70% compared to the same period last year. July’s lift in sales was not quite as high as the 73% recorded one month prior in June, but still enough for GM to record +70% gains for two consecutive months.
As for the Civic, Honda managed to sell nearly 32k new units, which grew total deliveries by an impressive 30% in July compared to the same period last year. News wasn’t quite as good out of Ford’s corner, but the brand still reported a small 2% gain for the Focus in July.
So the question on everyone’s mind… What’s causing all of this sudden demand for the Cruze? Well, a lot of the recent sales success is due to very enticing incentive deals, primarily in the form of lease promotions. Lease subvention for the months of June and July averaged around $4,620 for the Cruze compared to $1,750 for the Civic, and $2,730 for the Focus. July total incentive spending reached $2,047 for the Cruze, quite a bit higher than the Civic’s $1,047 and the Focus’s $1,673.
In the last five months, there has been a noticeable increase in total incentive spending on the Cruze, which is a direct result of the heightened rates of spending on lease promotions and also customer cash.
Considering the Cruze only stickers for around $17k-to-$23k, brand new, these recent levels of incentives are fairly lofty, especially the current lease promotion deals. GM needs to be careful and hold back on juicing customer cash because as we’ve talked about in the past, this form of incentive has the biggest corrosive effect on late model used value retention.
As a result of all of the great deals consumers are finding when they shop for the new Cruze, demand has increased and new sales have grown proportionally. It’s no surprise that current inventory levels are super low as days’ supply in July decreased to 34 days, which is the lowest reported for the model since August 2011.
High demand is never a bad thing in the automotive world, although not having enough supply to meet demand is. This is why the automaker will be forgoing next weeks planned vacation in order to get supply back in proper levels. While GM is content with achieving its sales success by offering substantial incentives and maximizing production, at the moment, it remains to be seen how much longer the company will employ this strategy and how great an effect on sales a pullback in incentives will be, if and when that happens.