General Motors is hiking prices across the board, by an average of 1.5%, though the actual price increases will be higher on some models and on others, such as the new Malibu, there will be no increase. The price increase is said to be intended to compensate for higher material costs, such as the rising price of steel.
 
The price increases translate from $100 to $500 per car.
 
Coming as GM has, once again, resorted to rebates – the ostensibly seasonal “red tag” sale just initiated – to move cars and trucks in a declining market, the price increases seem rather odd. Why bother to increase the price on a car that you have to discount so deeply to sell that it amounts to practically giving the thing away?
 
Case in point: the highest increase will be on the two-seat Cadillac XLR, to the tune of $1,500. According to GM vice-president of sales Marc LaNeve, “[t]his targeted price increase is designed to partially recover ever-increasing commodity costs." But how? The XLR is one of the most deeply discounted vehicles in the GM product line, an unqualified sales failure. It’s hard to see how GM is to recover costs by raising the prices of vehicles which is currently is able to sell only by offering large cash incentives.
 
GM’s pricing is certainly schizoid. First it says it won’t rely on incentives. Then, of course, it does rely on incentives. Then, while offering the largest incentives of the year, it’s announcing a price increase.
 
Maybe it’s just another sales tool. The price increases apply only on cars priced after January 1st, and not to current dealer inventory. So, maybe it’s all designed to give one more sales tool to the dealers during the “red tag” sale.
 
Surely, however, not even GM can believe customers are that dumb.

What do you think?
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