Popular GMC subbrands Denali, AT4 attract more diverse customers

VAIL, Colo. — GMC used to just be General Motors' truck brand. But the automaker has groomed it into a purveyor of high-profit, loyalty-driving subbrands, with the hugely successful Denali line and an expanded collection of AT4 off-roaders poised to soon make up about half of GMC's sales.

The brand also might resurrect the Hummer name for what could be a family of electric pickups and SUVs starting next year.

"It's almost the next generation of what accessories was to cars, now these subbrands," said Steve Hill, GM's vice president of U.S. sales, service and marketing. "If you go up to someone who drives a Yukon, they don't say, 'I drive a Yukon.' They say, 'I drive a Denali.' That's how important it is. It's part of who they are."

The massively profitable Denali line made up 30 percent of GMC sales last year, and GMC is rolling out AT4 across its full lineup this year. The brand unveiled AT4 versions of the Yukon SUV and Canyon pickup last week, along with the redesigned Yukon and Yukon XL.

The subbrands lead to greater personalization and higher profits for GM and its dealers. Analysts predict GMC will take a similar approach with Hummer as it builds an electric pickup in late 2021 and an electric SUV shortly thereafter.

Because of the capability that its vehicles combine with a premium look, both mainstream and luxury car buyers consider buying GMC, said Duncan Aldred, vice president of global Buick and GMC.

"Customers who might be traditional luxury buyers will happily buy a Denali or, increasingly, AT4," Aldred said at a media event in the mountains of Colorado last week. "And similarly, people who are historically mainstream buyers would aspire to get into an AT4 or a Denali."

In 2019, GMC represented 3.4 percent of U.S. new-vehicle sales, the second time its share has hit that mark in 12 years, Aldred said. GMC sales rose 1.5 percent last year while the industry declined 1.2 percent, according to the Automotive News Data Center.

The subbrands bring dealers a more diverse set of customers and, as new-vehicle margins continue to shrink, provide dealers with an additional profit opportunity.

"There are two distinct customers," said Todd Ingersoll, CEO of Ingersoll Automotive in Danbury, Conn. "The person who drives an AT4 is not the same guest that we would see in a Denali. The subbrands have really expanded the brand nicely."

Denali debuted on the Yukon about two decades ago, and now about 60 percent of Yukons sold are Denalis. AT4 launched on the Sierra pickup in 2018, and for the models on which it's available, it represents 17 to 20 percent of sales. By the end of this year, all GMC nameplates will offer an AT4 option.

GMC vehicles "can go anywhere and be wholly accepted," Aldred said. "Denali really is the epitome of that. You could go to a red-carpet premiere with a tie on and get out of a Denali, and everyone would just think that was the most natural thing in the world. Or you could go a worksite, building a house, and the Denali would look equally in place there. There are very few brands of any descriptions which can pull that off."

In 2018, Aldred thought Denali might have plateaued as AT4 demand rose. The off-road subbrand is priced one tier lower than Denali, selling for about $2,000 less.

The average AT4 buyer is new to GMC and younger and more adventurous than other GMC owners. Many have young children and a high household income.

"We did think there would be some switch-sell," Aldred said.

Instead, Denali share continued to grow last year along with AT4. "It just further reinforces GMC's ability to act as a true premium brand," Aldred said. "It really shows people are willing to pay for GMC. The subbrands are very strong, very successful and very desirable."

When Aldred took charge of GMC in 2014, he thought Denali was "a real diamond," he said. "Just talking to people, you realize the equity in that name, what it means, that people really take pride in that."

In 2015, GMC targeted getting Denali to 25 percent of its sales by 2020. But it hit 29 percent in just three years.

"We are just seeing this generic growth in the value of the brand, the equity in it," Aldred said. Denali retail sales reached a record in 2019 of 142,000 vehicles, with an average transaction price of $55,797.

"From a business point of view, it transacts like a luxury vehicle both in volume and in price," Aldred said.

There has been wide speculation that GM will bring back the Hummer name — which it retired in 2010 — to adorn GMC electric pickups and utility vehicles. GM has not yet confirmed whether Hummer will be a subbrand or a family of vehicles.

GMC is "trying to make families of all their subbrands … to get higher transaction prices for them," said Paul Waatti, an AutoPacific analyst.

"It's drawing new buyers to the brand, and it gives customers choice. To have that choice and the fact that you get more built-in equipment it a major plus."