GM's China Sales Slipped Again Last Month: What It Means

By Markets Fool.com

The Buick Envision crossover was a huge hit for GM in China last year. It continued its winning ways last month, even as other GM brands slipped. Image source: General Motors.

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What's happening: General Motors said that its sales in China fell 9.3% in February.

By itself, that's not bad news: A lot of GM's rivals saw sales fall in February, in part because of the timing of the Chinese New Year holiday. But after a strong 2015, GM seems to be taking a step back in the Middle Kingdom.

About that holiday and China's car sales
China's New Year's holiday is a major celebration. Many Chinese businesses, including new-car dealerships, close for several days following the New Year's holiday, which fell on Feb. 8 this year.

But here's the thing that complicates our year-over-year auto sales comparisons: Chinese New Year is a lunar holiday, meaning that the date isn't driven by the calendar. Sometimes it falls in late January and sometimes in February. (It was on Feb. 19 last year, but it was in January in 2014.)

Here's the thing for investors to remember: To account for the effects of the holiday, most analysts add January and February together when looking at year-over-year comparisons for new-car sales in China. That yields a much more fair comparison.

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But even by that standard, 2016 isn't looking great for the General so far.

Good news and bad news for GM in China
GM's sales in China rose 7.3% in January, but that wasn't enough to offset February's decline. Through the first two months of 2016, GM's sales in China have slipped 3.7%.

The good news for GM in February was quite good. Its sales of SUV models continued to soar, up 115% from the year-ago month. GM has two big hits in China's fast-growing SUV market at the moment, with the affordable Baojun 560 and the premium Buick Envision. The affordable Baojun 760 minivan is also selling very well right now.

The Baojun 760, an affordable family hauler made by Shanghai GM, put up strong sales numbers in February. Image source: General Motors.

Both the Envision and the 560 played a big role in boosting GM's profits in China last year and in helping GM recover the China sales crown from rival Volkswagen . Both posted strong sales numbers again last month.

Elsewhere, the news was a mixed bag. Buick sales were up 16%, thanks to the Envision and continued good sales of the Excelle GT sedan, a sibling of the U.S.-market Buick Verano.

Cadillac sales fell 16% in February, but GM said that the brand nonetheless set a sales record for the first two months of the year. Cadillac's SRX crossover has sold very well in China, but it's currently being phased out in favor of the new XT5; that may have had an effect on the brand's sales last month.

In contrast to its premium siblings, the Chevrolet brand is having a tough time in China. Sales were down a whopping 48% last month, a drop that GM attributed to "the contraction of the small-car segment." The Chevy Sail, a small, inexpensive sedan developed specifically for China, is having a tough time as more buyers at that end of the market are choosing inexpensive SUVs from domestic Chinese manufacturers.

Sales were down 18% at GM's Wuling joint venture, which makes small commercial vans. Like rival Ford's Jiangling Ford venture, which also makes commercial vehicles, Wuling is suffering from a slowing commercial-vehicle market as China's construction boom continues to ebb.

Looking ahead for GM in China: The General just added two new sedan models to its China product portfolio; we should start to see sales numbers for those over the next couple of months.

GM launched its flagship Cadillac CT6 sedan in China at the end of January. China-market CT6s are being built at a new factory in Shanghai. Image source: General Motors.

First up was the new top-of-the-line Cadillac CT6 sedan, launched in China at the end of January. It's the first model to go into production at GM's new high-tech Cadillac factory near Shanghai. It was followed by the new Chevrolet Malibu XL on Feb. 27. The Malibu XL is a twin of the new-for-2016 U.S.-market Malibu; it's called "Malibu XL" in China to differentiate it from the last-generation model, which will continue to be sold as a value-priced entry.

Meanwhile, Shanghai GM is gearing up to export its first-ever model to the United States. That hot-selling Buick Envision crossover SUV is joining the U.S. lineup. GM may begin producing the Envision here in the U.S. at some point in the next year or two, but for now, U.S.-market examples will come from GM's Chinese operation.

The article GM's China Sales Slipped Again Last Month: What It Means originally appeared on Fool.com.

John Rosevear owns shares of Ford and General Motors. The Motley Fool owns shares of and recommends Ford. The Motley Fool recommends General Motors. 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.