10/27/2004

Hummer Light

GM is introducing a new Hummer - the H3. The H3 is actually much smaller; its more like the size of a Jeep Liberty instead of the regular Hummer that we are used to. With this new Hummer, GM addresses the major complaint that they received with the H1 and H2 - cost. Not only is the H3 more affordable than the other Hummers, but it also has better gas mileage. It is said that the new Hummer can get up to 20 miles per gallon. The H3 also has a 5-cylinder engine with most of the off-road capabilities that the regular Hummer offers.

GM is trying to increase the demand curve of the Hummer. They are doing this by using price as a tool to increase demand. The H3 is more affordable both directly (cost of vehicle) and indirectly (cost of gas) and more people with different income levels can afford it; thus shifting demand.

9 comments:

Biancca said...

I don't understand the big deal about Hummers, but I am happy to see that they are making a more environmentally freindly version. If they could make a solar powered one, or one that runs on vegatable oil maybe I would buy one.

peter_parker said...

Reducing the size of the H2 makes it appear almost "micor-machinish". Apparently GM has high hopes for potential in the SUV market because they have invested a lot of money in the past few years. They easily have the most models of SUV out of any other car manufacturer.

Rufio said...

Hummers have become quite successful over the past few years. The original Hummers were quite expensive, but with the increase in the demand of SUVs over the past 10 years many people began spending this high price for them. The SUV market is very competitive, and a company that sells expensive vehicles cannot survive. By introducing a new, less expensive model of the Hummer the company has broaded its market and opened themselves to more demand for their product. Brilliant move by Hummer.

natty said...

I think that GM should be careful when they make the Hummer more affordable. They are attempting to increase their target market but at the same time they might injure the reputation that they already have. For example, Levi Strauss significantly lowered its reputation when it let Walmart carry their brand. The people who traditionally buy Hummers are looking for something that is expensive and makes a statement.

John West said...

Jasmine brought up a good point that I had not considered earlier when reading Janet's post on this same story. Hummer may be making a mistake in making their SUV's more affordable and in reach of the average joe. However; look at Lexus', BMW's and Mercedes'. They all have model that start in the $30,000 range and up from there. Hummer's traditionally have been around $50,000 and up. Maybe Hummer wants to model themselves after these other car companies.

Bryce Larkin said...

I believe that this is a great move for Hummer. Most of the high class car companies have done this, like Jaguar and BMW. Hummer will get their name and truck out to more people because it will be more affordable.

Maudi said...

With the price of fuel it's no wonder GM is trying to reach all markets. I agree that this vehicle will be quite popular with people who want the H2 look but without the H2 price. Chevy is trying to appeal to people and I feel this is a great strategy. Many people either don't have the money or the ability to pay for fuel so the H3 is a great idea.

Dr. Tufte said...

Thanks for putting some economics in there Miles.

I'm not sure I would call this an increase/shift in demand though. I think this is a brand new product with its own demand.

I think this also alleviates Jasmine's complaint as well - as long as they market it as broadening their product line and not cheapening it.

Diana said...

By the numbers:
4,700 pounds: The weight of an H-3
16: Estimated city mileage per gallon
$75,000-$125,000: Household income of likely buyers
169: The number of Hummer dealerships nationwide including Hummer limo companies
20: The miles per gallon projected EPA fuel economy ratings for the H3
23: Gallon capacity for the H3 fuel tank
300: Projected number of H3s to be built daily at GM in Shreveport
7: Number of colors available in H3 -- Grenade Green, Black, Yellow, Stealth Gray, White, Silver Birch and Victory Red.