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TheStreet Open House

GM's Buick Encore, With Unique Niche, Is in Short Supply

Stocks in this article: F GM HMC NSANY TM

DETROIT ( TheStreet) -- As U.S. light vehicle sales head toward a fourth consecutive year of growth, the shortages of the Ford (F - Get Report) Fusion are drawing attention, but Fusion isn't the only vehicle for which demand is exceeding supply.

GM's (GM - Get Report) Buick Encore compact luxury crossover is down to a 15-day supply. "Initial demand was greater than expected," said Buick spokesman Nick Richards. "I wouldn't call it a shortage right now. (Encore) is just selling extremely well.

"We're currently tracking about a 15-days turn rate," Richards said. "We have more arriving every day, so dealers are seeing inventory improve. We're also seeing customers order a greater percentage of high-content vehicles than originally forecast. The top two trim levels account for more than 50% (of sales), with the feature rich 'Premium' top trim level turning the fastest."

Through July, Encore sales totaled 15,428, including 3,176 sales in July, its best month ever. Overall, Buick sales rose 14% to 16,393 in July, when total light vehicle sales rose 14%. Through July, Buick sales rose 12% to 117,230: during the same period, light vehicle sales rose 8.5%.

A recent headline in Automotive News proclaimed "GM moves to ease shortage of 'red hot' Encores." The trade publication reported that: "GM underestimated initial U.S. demand for the Buick Encore when it was launched in January and says it recently boosted output of the crossover at a plant in South Korea."

Encore's success is due largely to its dominance of the subcompact luxury crossover market, where it is in fact the only competitor. Encore "combines subcompact size, luxury amenities, fuel economy and price," Richards said. "There really aren't any other competitors that offer this combination right now."

Independent Boston-based auto analyst John Wolkonowicz said the Encore's secret is that "it looks like a miniature version of the Buick Enclave," a full-sized luxury crossover that signaled the re-invention of Buick when it came to market in 2007.

"A lot of people would love an Enclave, but they said 'I don't need a vehicle that big,' " Wolkonowicz said. "There is a market for small premium crossovers and there are very few of them. Buick has taken a very successful vehicle and scaled it down into what is another very successful vehicle, a darn good-looking little crossover."

Encore is slotted between lower-priced subcompact crossovers, such as Nissan (NSANY) Juke, Mitsubishi Outlander Sport and Suzuki SX4, and the higher priced Mini Countryman, BMX X1 and Land Rover Evoque. "We see a lot of the customers coming from compact crossovers" such as Toyotas (TM - Get Report), Hondas (HMC - Get Report) CRV and Ford Escape, Richards said.

Automotive News called the Encore "a pioneer in the nascent market for small premium crossovers," but said "Audi, Lexus, Lincoln and Cadillac all are likely to throw their own small premium crossovers into the fray over the next two years."

Kelley Blue Book analyst Karl Brauer said Buick "is doing all the right things (as) it continues to recover from the stigma of being for older people, but it's a long trip back." The brand survived brand consolidation at GM, he reminded, only because of its popularity in China. GM said last week that China sales rose 11% in July as Buick deliveries rose 26% to 66,208.

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

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