Once the hottest SUV on the market, sales for the Hummer H2 sport utility vehicle have cooled in recent months, forcing General Motors to offer US dealers incentives to help move sales, Reuters said.
According to the report, US sales of the H2 fell 21% in February, the sixth straight month of a year-over-year drop in results – sales fell even though GM offered 48-month leases on the SUV last month with no down payment, no first month’s payment and nothing due at the signing.
Inventories of unsold H2s are running at a 52-day supply, more than twice as high as the rate a year ago, although at a healthy rate compared to the overall industry, Reuters added, noting that Hummer owners ranked the brand last in a benchmark poll of vehicle quality released last year by JD Power and Associates, complaining about the military-inspired vehicle’s fuel consumption, among other gripes.
“What you’re dealing with here is a phenomenon that was really hot to be begin with. It caught the public’s fancy. But (the H2) has a limited audience, it’s expensive, and it uses a lot of gasoline,” George Magliano, director of automotive industry research at Global Insight, told the news agency.
Reuters said GM remains unconcerned because the Indiana plant that makes the H2 has annual capacity for 40,000 vehicles, but “can go significantly below 30,000 and still make a profit,” according to Hummer spokesman Pete Ternes.
Ternes reportedly added that a new pickup truck version of the H2, arriving in dealerships in April, will help maintain the model line’s worldwide sales at around 36,000 while GM expects Hummer brand sales to grow to 100,000 annually after it launches a smaller H3 SUV next year.
Dealers told Reuters they are already taking customers’ deposits on the new pickup, called the H2 SUT for “sport utility truck” though they also said the truck is failing to generate the buzz the H2 garnered in 2002.
That was the year some consumers paid a premium over the vehicle’s actual cost of up to $US10,000, on the Internet auction site eBay, just to be the first to own the new SUV, the report noted.
Dealers also said interest is growing in the H3, which will sell for between $30,000 and $40,000, Reuters said.
The report said Hummer is meantime set to offer dealers cash incentives to help sell the 2004 model year H2 SUV to make room for the 2005 model which arrives early this year.
Spokesman Ternes told Reuters that GM has also addressed some of the concerns raised by the JD Power quality study. He reportedly said that, unlike other passenger cars and trucks, and because of its heavy weight, GM doesn’t have to display the H2’s 11 to 13 miles per gallon petrol consumption on the window sales sticker but dealers are telling consumers about the fuel economy rating to prevent ugly surprises.
Nonetheless, according to Reuters, dealers say the well-heeled buyers who buy the H2, which starts at about $48,000, aren’t concerned about petrol prices, even with per-gallon prices at record highs in some states.
“It’s a rarity that somebody says ‘I need something with better gas mileage,”’ the sales manager at a Michigan Hummer dealership told the news agency.
Global Insight’s Magliano told Reuters the H2 may have lost some of its initial spark, but he still expects sales to stabilise, with the SUV continuing to be a profitable vehicle for GM.
“Do I expect this vehicle to tank? No. I think it has a select following. It’s going to seek its niche and it will maintain itself,” he reportedly said.