Top-dollar subbrands boost GMC over Cadillac

DETROIT — Detroit's biggest seller of luxury vehicles isn't Cadillac anymore. It's GMC.

GMC's high-end Denali and AT4 lines are outselling General Motors' traditional luxury brand in the U.S. this year, according to figures from GM and the Automotive News Data Center. The automaker is building on Denali's ability to command luxury prices by expanding the AT4 off-road subbrand and planning a pair of high-performance electric vehicles that will revive the Hummer name.

"People are coming in writing $80,000 to $90,000 checks for these trucks," said Inder Dosanjh, dealer principal at Dublin Buick-GMC and Fremont Buick-GMC in the San Francisco Bay area. "There's so much demand out there."

In a year when U.S. auto sales are down 18 percent, most Denalis and AT4s arrive at Dosanjh's dealerships already sold, and customers are willing to open their wallets during a recession to load them up with extra features.

"We can't get enough of them," said Will Churchill, dealer principal at Frank Kent Country in Corsicana, Texas.

Largely because of the success of Denali and AT4, GMC has contributed hefty profits to GM's bottom line during the coronavirus pandemic and is positioned to generate a sizable portion of the cash cushion needed for the automaker's $20 billion push into EVs and autonomous driving.

Denali and AT4 have accounted for 40 percent of GMC's retail sales in 2020 so far and soon could generate as much as half of the brand's volume, said Duncan Aldred, vice president of global Buick and GMC.

Together, the two subbrands drove GMC to its highest retail market share in the first half of the year since 2005, Aldred said, with an average transaction price 30 percent higher than the industry overall. Buyers paid an average of $57,218 for a Denali and $53,989 for an AT4 — topping BMW, Audi and Jaguar, he said.

"In its own right, [Denali] would be a very, very successful luxury brand," Aldred told reporters last month. "We're not doing this by discounting or trying to go to the lower end. We're staying true to the vision of being the only premium brand that occupies this space."

GMC, whose vehicles were often criticized in the era of Old GM as being just dressed-up Chevrolets, has grown in recent years into a "stealth luxury brand" that appeals to a wider swath of the market than the legacy competitors in that space, said Jeff Schuster, president of the Americas operation and global vehicle forecasting at LMC Automotive.

"Having the luxury features and content in a brand that isn't necessarily thought of as luxury is appealing to some buyers," Schuster said. "It's addressing part of the market that wasn't getting fully addressed previously. Consumers are gravitating toward these subbrands."

GMC's profile will rise further next year with the Hummer electric pickup, giving the clunky gas-guzzler of the 2000s new life as GM's first electric pickup. GMC has confirmed plans for an SUV bearing the Hummer name as well, tapping into its subbrand savvy.

GM plans to unveil the Hummer pickup, which it's calling "the world's first all-electric supertruck," during the TV broadcast of Game 1 of the World Series on Oct. 20.

GMC will complete its rollout of AT4 in 2021 by offering it on the Terrain compact crossover. AT4, which was introduced in 2018 on the Sierra full-size pickup and added to everything else except the Terrain this year, has become the brand's fastest-turning trim.

Customers are so enthused about Denalis and AT4s that they'll pay sticker price, Churchill said. The trouble is overcoming inventory shortages created by last year's UAW strike and two months of production lost to the pandemic in the spring.

"It's not even a question," he said of buyers' willingness to pay what GM is asking. "It's a matter of who has them."

In the first nine months of 2020, GMC's U.S. sales fell 16 percent to 353,221, partly because of the inventory shortages and reduced fleet orders. But sales of the Sierra rose 6.8 percent, vs. an 8.8 percent decline for other full-size pickups. Meanwhile, sales fell 17 percent for Chevy and 25 percent for Buick and Cadillac.

In a market that's become heavily tilted toward light trucks, GMC has an advantage over Cadillac, which only recently expanded its lineup from one crossover to three. Cadillac also doesn't have the popular pickups that GMC has.

"Denali is on everything. They are in the hotter segment than where Cadillac is," said Churchill, who also is a Cadillac dealer. But he added that Cadillac remains a stronger brand overall for GM, with pricing led by the Escalade SUV that stretches into six figures.

GMC Denalis and AT4s come at a hefty price for consumers and a high profit for GM. The 2021 Yukon, for example, starts at $51,995, while the four-wheel-drive Denali model starts at $72,695. The Yukon AT4 starts at $66,095.

Most of the nearly $21,000 spread between the base Yukon and the Yukon Denali goes directly to GM's bottom line, said Paul Waatti, an analyst at AutoPacific.

"They add some more equipment, nicer trimmings. But from a cost standpoint, it's all profit for them," he said.

The Denali and AT4 enhancements are "incremental expenses for GM, but exponential profit."

Denali and AT4 attract premium buyers, not the traditional customers who need a pickup for work, said California dealer Dosanjh. One customer bought an AT4 as his daily driver in Pebble Beach but has another pickup to use at his ranch, he said.

After the success of the Ford F-150 Raptor, Howard Drake, who owns Buick-GMC Sherman Oaks in the Los Angeles area, had no doubt about the value AT4 would add to GMC's portfolio.

"We have yet to see a Yukon AT4, but sight unseen, we have several sold," Drake said. "The look of this thing — it's got home run written all over it."