Costco Wholesale Corporation (NASDAQ: COST) has been in the car sales business for years. It occasionally runs the equivalent of a “sale”. The most recent sale promotes many of the models in the Chevy lineup, and niche cars made by small and troubled Volvo.
The Costco Auto Program is available to the big-box retailer’s members. Unlike most other retailers, Costco charges customers for the privilege to shop in its stores. The program sets prearranged prices with manufacturers, which in theory saves Costco members money. The plan covers new and pre-owned cars. Its car maker partners have to be thrilled with the results. Last year, members bought over 600,000 vehicles via the plan.
Costco said it picked Volvo and Chevy because they are the most popular cars in their classes. The Volvo XC90 falls into the luxury SUV category. The Chevrolet Silverado is the top truck purchased by Costco members through the program.
Volvo needs the program more than Chevy, General Motors Company’s (NYSE: GM) top-selling brand. It competes with Mercedes, BMW, and Audi, which all handily outsell it. Volvo recently did poorly in both the J.D. Power 2020 Intiatial Quality Survey and its 2020 U.S. Vehicle Dependability Survey.
In the current Costco sales plan, GM brands come with a discount of $1,000. This includes Chevrolet: Blazer, Colorado, Silverado 1500/2500/3500, Suburban, Tahoe, Traverse, and Blazer; Buick: Encore and Enclave; GMC: Acadia, Canyon, Sierra 1500/2500/3500, Yukon and Yukon XL. The Volvo $1,500 discount is on its Volvo XC40, XC90, and XC60.
There is a $3,000 incentive for the Chevrolet Bolt EV, which has been a staggering failure for GM. Bolt sales are a small fraction of those of primary competitor Tesla Inc (NASDAQ: TSLA).
Several of the GM models sell extremely well outside the Costco program. The Silverado is among the best selling vehicles in America. It competes in the full-sized pickup segment with the Dodge Ram, and Ford Motor Company (NYSE: F) F-150, which is the best selling vehicle in America.
The Costco Auto Program undoubteled gets members good prices on cars and good service. Otherwise, sales last year could not have approached a 600,000 figure. It is also good for the car makers, and particulalry those which struggle.