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.

4 comments:

Natalie 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.

Ernie 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.

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.

Unknown 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.