(Bloomberg) -- Fiat Chrysler Automobiles NV’s Ram just recorded another big month of U.S. sales, in part by paying dealers as much as $7,500 to get them to do the buying.
The company ran a promotion in the last days of the month on a range of 2019 Ram 1500 pickup models to entice dealers to purchase the trucks for their service-loaner fleets, according to an emailed memo. Fiat Chrysler offered as much as $3,000 cash payments to get dealers to put the trucks into service fleets, and up to $7,500 for when they are moved to dealers’ used-vehicle lots.
Dealers loan service vehicles to customers whose cars are being repaired. Paying dealers big, late-month incentives do more buying than they might otherwise is a tactic that helped BMW AG outsell rival Mercedes in the U.S. luxury market in 2016. Some dealers criticize the programs for artificially inflating sales and undermining their ability to hit future targets the manufacturers set.
Fiat Chrysler is taking a two-pronged approach to gain share in the ultra-competitive pickup market. Its award-winning redesigned Ram 1500 has been a hit with big-spending customers, but it’s also extending production of its older “Ram Classic” pickups through 2019 to go after more budget-conscious buyers.
Ram’s pickups have been closing the gap with General Motors Co (NYSE:GM).’s Chevrolet Silverado, the longtime No. 2 in the full-size truck segment, and even outsold that model line in the last three months of 2018.
“We’re going to keep our pickup trucks competitive in the marketplace, whether that’s through advertising, marketing, incentives, whatever,” Reid Bigland, Fiat Chrysler’s U.S. sales chief, said in an interview in January.
A Fiat Chrysler spokesman said the company doesn’t comment on dealer incentive programs.
Ram pickup sales jumped 20 percent to 39,950 units in February, while overall deliveries for the brand were up 24 percent. GM no longer reports monthly figures to the public and will release quarterly results early next month.
Fiat Chrysler is offering big discounts on its older Ram Classic models. Incentives were about 21.5 percent of average transaction prices in February, compared with 16.1 percent for older model Chevrolet Silverados and 14.3 percent for Ford Motor (NYSE:F) Co.’s F-150, according to J.D. Power dealer data.
Incentive spending by both Fiat Chrysler and GM probably will decline this year because the companies have introduced redesigned models, said Eric Lyman, chief industry analyst at TrueCar Inc.’s ALG unit. Ford, whose F-Series line dominates the segment, likely will increase promotions because its models are older.
Fiat Chrysler and GM incentives aren’t that far apart, according to Lyman. The forecast for their residual values in the next 36 months are among the strongest in the pickup segment, he said.
“While we’re seeing Ram and Silverado come down in their spend with that sort of long view, we’re also seeing Ford go up,” Lyman said. “They’re starting to converge, and I think that makes sense, because you have the influence of those new models coming into the market.”