A New Twist on an Old Tale: Sales of General Motors' Trucks and SUVs Are Soaring

By Markets Fool.com

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Sales of GM's big pickups are looking up: The Chevrolet Silverado and GMC Sierra (shown) gained 22% in January. Source: General Motors.

General Motors said on Tuesday that its U.S. sales rose 18% in January, as strong demand for trucks and crossovers gave GM its best January for U.S. sales in seven years.

That number fell slightly short of Wall Street expectations, which had projected a 19% gain for GM. But it was enough to outpace most GM rivals, including Ford, which posted a 15% gain on similar strength in trucks and crossover SUVs.

Market trends favor GM's most profitable products, and they're strong entries
The story in January was a good one for General Motors. While January is generally a sluggish month for auto sales in the U.S., customers flocked to GM showrooms as lower gas prices and an improving employment picture put more Americans in a car-buying mood.

That enthusiasm translated into big demand for some of GM's most profitable products: its pickup trucks and full-size, truck-based SUVs. These are fresh products -- the Silverado and Sierra full-size pickups were all-new for 2014, while the midsize Colorado pickup and GM's big SUVs are all-new for 2015 -- and good critical reviews, plus lower gas prices, helped drive a big month for GM.

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Crossovers like the big Chevy Traverse, which holds seven or eight passengers depending on options, are proving to be very popular with families. Traverse sales were up 89% in January. Source: General Motors.

GM is also seeing good results with its "crossovers," vehicles like the Chevy Traverse that are based on unibody car-type architectures rather than the full-frame truck platforms used for GM's biggest SUVs like the Chevy Tahoe and Suburban.

Crossovers have replaced minivans as go-to family haulers in many automakers' lineups, including GM's. Combining the interior space of an SUV with some of the truck's foul-weather capabilities, and with more carlike handling and -- important -- much-improved fuel efficiency over the truck-based SUVs of old, the models have proven to be very strong sellers. With sticker prices generally running several thousand dollars higher than their sedan equivalents, they also tend to be very profitable products for automakers.

And several of GM's crossovers, like its pickups and big SUVs, had a great month in January.

Big gains for GM's profitable trucks, SUVs, and crossovers
As good as Ford's pickup gains were -- and they were quite impressive -- GM's were even better: a year-over-year gain of almost 22% for its large pickups, the Chevy Silverado and GMC Sierra.

A 25% gain for the Silverado helped pace the Chevrolet brand to an overall 20% gain. But Chevy crossovers and SUVs also had a strong January. Sales of the new-for-2015 Tahoe rose 88%, and the midsize Equinox crossover (up 34%) and big Traverse (up 89%) also posted market-busting gains.

Results at GM's more upscale brands followed a similar pattern. GMC sales rose almost 29%, as the Tahoe's upscale Yukon and Yukon XL siblings saw sales more than double over year-ago results, and the Terrain crossover posted a 25% increase. Car-heavy Buick posted a 5.5% sales decline for the month, but sales of its popular compact Encore crossover were up 46%.

Likewise at Cadillac, while sales of the ATS and CTS sedans continued to be soft (despite recent price cuts for the CTS), sales of the immense (andimmensely profitable) Escalade SUV rose 136 percent -- and sales of the longer-wheelbase Escalade ESV nearly tripled.

Sales of the Cadillac Escalade ESV, a plush upscale sibling of the Chevy Suburban, rose a whopping 188% in January. Source: General Motors.

This isn't happening because GM is offering fat discounts, either. TrueCar estimates that GM's average transaction price across its four U.S. brands was $36,173 in January -- up 7.7% from a year ago. Meanwhile, its incentive spending as a percentage of transaction prices was down about 2.6% from last January.

The upshot: 2015 is starting off very strong for General Motors
GM has vast and profitable operations in China, and significant presences in Europe, Latin America, and southeast Asia. But North America remains the most important driver of GM's global profits -- and that means that U.S. sales are still enormously significant to the General.

January couldn't have gone much better for GM. While its sales of cars were sluggish, that's in line with an overall industry trend as more buyers favor the new generation of crossovers and SUVs over sedans. But with sales of GM's trucks, big SUVs, and crossovers all up sharply -- and pricing trends moving in a positive direction -- the first month of 2015 suggests good things to come for General Motors' profits this year.

The article A New Twist on an Old Tale: Sales of General Motors' Trucks and SUVs Are Soaring originally appeared on Fool.com.

John Rosevear owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.