Curbside Newsstand: Denali and AT4 ‘Subbrands’ Ensure GMC Will Live Long and Prosper

Last year, I opined that 2019 would be the year of the “brand.” That predication partially came true. Brands increasingly relied on their heritage to sell cars, and automakers continued to revive older nameplates like Blazer, TrailBlazer, Passport, and Supra. But my forecast did not account for the rise of subbrands. Subbrands are basically extensions of one particular model. Or in GM’s case, they’re distinctive trim levels with their own unique identity. The Denali’s popularity and America’s thirst for adventurous looking utility vehicles prompted GMC to create the AT4 trim. Combined sales of both trims will soon represent about half of GMC’s sales. These subbrands are extremely profitable for GM and a boon for dealers. And they just might signal how automakers further refine their products in a hyper competitive market.

The AT4 subbrand – which is meant to encapsulate all-terrain, four-wheel drive vehicles – isn’t a revolutionary concept. Automakers have included similar trims and packages in their lineups for years. Ford offers the FX4 package on the F-Series, Ranger, and even the Expedition. But GMC’s Denali and AT4 trims are much more than a special set of options buyers can check off on an order form. They’re relatively easy to identify and not limited to GMC’s trucks. As a result, the brand broadened its appeal to buyers who wouldn’t normally consider a GMC:

Because of the capability that its vehicles combine with a premium look, both mainstream and luxury car buyers consider buying GMC, said Duncan Aldred, vice president of global Buick and GMC.

“Customers who might be traditional luxury buyers will happily buy a Denali or, increasingly, AT4,” Aldred said at a media event in the mountains of Colorado last week. “And similarly, people who are historically mainstream buyers would aspire to get into an AT4 or a Denali.”

The average AT4 buyer is new to GMC and younger and more adventurous than other GMC owners. Many have young children and a high household income. 

In addition to conquest sales, the new AT4 subbrand didn’t step on the Denali’s toes. Instead, it simply attracted a different demographic. GMC sold 142,000 Denali-branded vehicles in 2019, an all-time high. Those sales are highly profitable too: the average transaction price on a Denali-equipped GMC is just under $60,000. The AT4 subbrand created its own niche too, and about 20% of buyers opt for the trim regardless of model.

GMC’s strategy likely represents the way forward for mainstream automakers with diverse lineups. The AT4 emulates the Big Three’s truck lineups by offering nominally better off-road capability, desirable tech, and a unique aesthetic for a decent price. But unlike option packages of the past, GM’s subbrand strategy reduces cost by existing as its own thing instead of operating within a preexisting trim level. And that offers a better opportunity for higher profits. Additionally, the GMC brand is starting to resonate with more customers. Buick and Cadillac have the opposite problem.

The success of the subbrand might depend on how those trims build on the larger brand they represent. Either way, this new trend of specialized, brand wide trims will soon compete with a more explicit form of subbrand. Ford will most likely apply the Bronco name to an off-road oriented, Escape-based crossover. And the Mustang gains a new member with the Mach-E. Both types of subbrands carry their own set of risks and rewards, but for now it seems like we know which approach is working.