GM to Raise Prices 3% on 1986 N-Cars : Analysts Expect Firm to Announce Similar Hikes on Other Cars
Apparently undaunted by recent signs of softening in auto sales, General Motors said Tuesday that it will increase prices more than 3% on several sporty compact cars for the 1986 model year.
The move led analysts to predict that GM will raise prices on the rest of its passenger car lineup by an average of about 3% at the start of the 1986 model year this fall, despite increasing competition from Japanese imports and the gradual erosion of GM’s market share by rivals Ford and Chrysler.
By comparison, GM raised its prices an average of just 2.3% at the start of the 1985 model year.
GM said it is raising the prices on its three N-body compacts--first introduced last fall--by between 3.1% and 3.3% for the 1986 model year. The price of the most popular N-body, the Pontiac Grand Am, will be hiked by 3.1%, or $258, from the price of a comparably equipped 1985 model.
Meanwhile, the price on the Oldsmobile Calais is being hiked 3.3%, or $294, and the Buick Somerset’s price will rise $299, or 3.3%.
GM blamed the price hikes on rising production costs and on the addition of new standard equipment, including AM-FM stereo radios and rear window-mounted stop lights, which had been optional on the cars in 1985.
Adding 4-Door Models
But in comparison to the base prices on the 1985 model N-cars (which had less standard equipment than the 1986 base models) the price hikes appear even larger. The base price of a Grand Am is rising $400, or 4.9%; the Calais’ price is being hiked $614, or 7.1%, and the price of a Somerset is going up 4.3%, or $391.
GM also is adding four-door sedan models to its N-body lineup for the first time in the 1986 model year, which will carry higher base prices than the two-door versions. The four-door Grand Am will cost $8,749, while the Calais will be priced at $9,478. The four-door version of the Somerset, to be called the Skylark (a name last used on GM’s now-extinct X-cars) will cost $9,620.
Tuesday’s price hikes may also be followed by another increase sometime in the middle of the 1986 model year. Last December, GM announced mid-model-year price increases that averaged 2.3% and which came on top of the earlier 2.3% hike announced at the beginning of the 1985 model year.
GM made its pricing announcement on its 1986 model N-body compacts so early because the models are already being shipped to dealers ahead of the rest of the company’s 1986 model lineup. The company said the 1986 N-body models are now available everywhere except in California, where they will go on sale July 30.
The N-body price hikes were also released just one day after GM reported that it suffered its worst sales decline for any period so far this year during the first 10 days of July. GM’s sales fell 18.6%, while its share of the domestic car market (excluding imports) fell to 55.4%, down from 57.9% during the same period in 1984. At the same time, an industry trade publication reported that inventories of unsold domestic cars were at a four-month high at the beginning of July.
Analysts are now expecting domestic car sales to weaken even further during the second half of the year as the economy loses steam and as imports increase in the wake of the easing of restraints on Japanese shipments to the United States.
“The market is going to be very competitive this fall, with so many Japanese products out there,” said Joseph Phillippi, automotive analyst with E. F. Hutton.
But since price increases in the 3% range would still be below the inflation rate, analysts believe that GM’s N-body pricing announcement might set the pricing pattern for the domestic industry in the 1986 model year. David Healy, automotive analyst with Drexel Burnham Lambert, said Detroit will have to raise prices this fall to cover rising costs, despite increasing competition from imports.
