C7 Corvette: General Motors’ Upscale Upside

Launch expectations less about bottom line, more about brand

   

General Motors (NYSE:GM) is making a big bet on the Corvette that just might pay off.

The automaker is planning to introduce the seventh version of its legendary sports car — dubbed the C7 — in 2013 at the Detroit Auto Show that might enable the automaker to better compete against rivals in the luxury car market such as Porsche, Lamborghini and BMW.

“They are already beating these cars on the race track,” said Keith Cornett of www.corvetteblogger.com, in an interview, adding that enthusiasts can’t wait for the new model to go on sale. “Message boards and Corvette websites are blowing up.”

Shares of GM — which has yet to pay back all of its $49.5 billion federal bailout — were trading up Wednesday after the automaker reported better-than-expected results in spite of a $478 million loss in Europe, though shares were pulling back slightly Thursday.

Chevrolet is an integral part of GM’s recovery, which means keeping the Corvette brand “fresh” is of great interest to investors because they figure the buzz around the sports car will help bolster sales of other Chevy models.

General Motors debuted the latest version of the Corvette — which first rolled off the assembly line in 1953 — nine years ago. Sales of the vehicle are about 1,000 to 1,400 a month, far below where they started, because many Corvette fans are waiting to buy the C7, whose European styling might appeal to buyers who ordinarily would purchase more expensive imports.

Prices start at about $50,000 for the current model year.

Consumer anticipation appears strong, which means sales of the Corvette should improve significantly when the new model launches. Corvette already has about 30% of the premium sports car market, which is why GM believes that there is a strong business case for the vehicle.

“With the new Corvette, we set out to build a world-challenging sports car with design, refinement, efficiency and driver engagement that is second to none. The result is a truly all-new Corvette,” said Tadge Juechter, Corvette chief engineer, in a press release earlier this year. “There are only two carryover parts from the C6 used in the C7 — the cabin air filter and the rear latch for the removable roof panel.”

Rumors about the new Corvette are rampant. The new version is expected be lighter, more aerodynamically efficient and deliver more power than existing models, according to Edmunds.com. One fact that GM has confirmed is that the new Corvette will have a new logo that was chosen after 100 other options were considered.

Still, GM doesn’t have to sell huge numbers of Corvettes for the model to be a success, because it’s an aspirational brand.

“While the Corvette has always been a low-volume niche product, it is the halo brand for Chevrolet and takes on even more significance as the brand’s role grows for post-bankruptcy GM,” according to the website.

In other words, if the sports car’s fans think the new edition is “cool,” that perception could rub off on less-expensive vehicles in GM’s lineup.

As of this writing, Jonathan Berr did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2012/11/c7-corvette-general-motors-upscale-upside/.

©2014 InvestorPlace Media, LLC

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