Sales of the very big (and very profitable) Cadillac Escalade rose 47% in October. Image source: General Motors.
What: General Motors said on Tuesday, November 3, that its U.S. sales rose 16% in October, outpacing the overall market's gains.
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So what: GM's U.S. market share slipped for years. But recently, the trend has started to reverse, at least at retail. GM has gained retail market share in the United States for seven consecutive months versus 2014.
On a vehicle-by-vehicle basis, GM had a lot to brag about in October. Crossover SUVs continued to be hot, with the Chevy Equinox (up 25%) and Traverse (up 16%), GMC Terrain (up 47%), Buick Encore (up 39%), and Cadillac SRX (up 65%) all shining.
The big gains for the SRX are explained in part by the fact that it's in "sell-down" mode, with a new model expected soon. But the small-but-plush Encore has turned out to be a genuine hit for GM: It has now posted year-over-year sales gains for 22 consecutive months. It's not just a rental-car darling, either: Retail sales of the Encore were up 60%.
The Buick Encore crossover SUV has seen sales grow steadily since its U.S. introduction. Image source: General Motors.
GM's class-leading truck-based SUVs also continue to sell like hotcakes. The Texas factory that makes them is working flat-out, and GM is prioritizing higher-profit retail sales. All versions posted big gains: Chevy Tahoe (up 17% at retail), Suburban (up 25% at retail, GMC Yukon (up 18% overall), and Yukon XL (up 25% overall), and Cadillac Escalade (up 47% overall). These are extremely profitable products for GM, particularly in the higher trim levels.
Pickup sales continue to be strong. The full-size Chevrolet Silverado (another especially profitable product) was up 14%, and the midsize Chevy Colorado and GMC Canyon continue to sell at a brisk pace.
As we've seen at rivals, sales of car models have been more subdued in 2015. The midsize Chevrolet Malibu posed a 19% retail gain, but it's also in "sell-down" mode, with a brand-new (and much-improved) model expected to arrive at dealers soon.
A note about retail versus fleet salesThe emphasis on "retail" is important, and not only because retail sales are generally the most profitable. GM, like rival Ford , is looking to rein in its sales to rental-car fleets. Year to date, GM's sales to rental-car fleets are down about 10%. Not only do those sales generate very thin profits, they also depress used-car values.
Here's why: Rental car companies sell off their cars after two or three years. That drives down the auction prices that are used to set "residual values," the assumed value of a vehicle at the end of a lease. Lower used-car prices make it harder for GM to offer competitive leasing deals on corresponding new models.
But not all "fleet" business is bad. Commercial and government fleet sales often include pickups and SUVs and can be quite lucrative. GM and Ford compete hard for that business, and rival Fiat Chrysler would like to get more of it.
So far in 2015, GM has been the winner on those fronts. Year to date, GM's commercial-fleet deliveries are up 14%, and its government-fleet deliveries are up 17%.
Now what: GM posted an exceptionally strong operating profit margin in North America in the third quarter. With one-third of the fourth quarter in the books, and sales of GM's most profitable products continuing to look very strong, another good result could be on the way.
Still, the broader trend here is worth noting. GM is winning market share not with steep discounts, but with very competitive products in the "sweet spots" of the market. Its competitiveness and quality ratings have risen sharply since its 2009 bankruptcy, and it's now able to gain ground in key segments while holding its pricing at strongly profitable levels. The result is visible in GM's monthly sales numbers -- and in its quarterly earnings reports.
The article Big (and Small) SUVs Drive Big Sales Gains for General Motors originally appeared on Fool.com.
John Rosevear owns shares of Ford and General Motors. The Motley Fool recommends Ford and 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.
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