General Motors' Crossover SUVs Are Driving a Sales Boom

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General Motors (NYSE: GM) had a terrific month for U.S. sales in August. The General's U.S. sales rose 7.5% last month, far outperforming the 1.9% decline posted by the U.S. light-vehicle market as a whole.

GM's gain came despite the effects of Hurricane Harvey, despite weak demand for sedan models, and despite a big month for arch-rival Ford Motor Company's (NYSE: F) pickup sales.

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What drove GM's gain? The success of its crossovers.

What's the big deal about crossovers?

"Crossover" SUVs are selling in huge numbers in the U.S. and China, GM's two biggest markets, and they're increasingly popular elsewhere in the world. They're called "crossovers" because they "cross" the spaciousness and some of the utility of traditional truck-based SUVs with architectures that are more like those of cars than trucks. That helps give them a more comfortable ride and handling characteristics and better fuel economy than the truck-based SUVs that were common 10 or 15 years ago.

The popularity of crossovers has grown over the last few years as sedan sales have fallen. For investors in automakers, which sell a lot of crossovers, that has been good news: Generally speaking, crossovers are more profitable than similarly sized sedans.

For GM, the boom in crossover sales has come at a good time. Over the last year, GM has rolled out all-new (and much-improved) versions of nearly all of its crossover models, with more on the way. Since brand-new vehicles tend to be more competitive and sell with fewer discounts than those that have been on the market for a few years, that should be a profitable situation for GM.

In fact, GM executives have said they think the increased profits from their new crossovers should help offset the effects an overall weakening of the U.S. new-vehicle market. That'll be true if GM's new crossovers sell well at good prices.

Big gains for most of GM's crossovers last month

So how is that effort going? Here are the August U.S. sales results for all of GM's crossover models:

As you can see, demand for all of GM's "new" crossovers was very strong last month. The small Buick Encore isn't all-new, but it did get a significant update for the 2017 model year. On the other hand, the big Buick Enclave is about to be replaced with an all-new 2018 model; dealers are currently selling off the last of the outgoing models.

Some of these totals were helped by discounts. TrueCar estimated that GM's incentives rose to a hearty $4,546 per vehicle in August, up nearly 6% from July. But that doesn't mean GM is taking a bath on its all-new crossovers. Most of those discounts are on GM's car and truck models. And when there are big discounts on GM's crossovers, there's a story: The big sales total for the Chevy Traverse, for instance, is a mix of just-launched, all-new 2018 models and deeply discounted 2017 models.

GM's crossover profit train could run for another year or more

This profit train could run for a while longer. GM is believed to have several more all-new crossovers in the works, including:

  • Three all-new Cadillac models to join the XT5, which was new last year. A new Cadillac crossover larger than the midsize XT5 is expected in 2019, with two smaller models to follow.
  • An all-new midsize Chevrolet crossover (larger than the Equinox, similar in size to the Ford Edge) that will likely revive the Blazer nameplate is expected next year.
  • Redesigned versions of the Encore and Trax. One or both could arrive late next year as 2019 models.

Long story short: We won't know for sure how profitable this crossover boom was for GM until it reports its third-quarter results in October. But August's results suggest GM's new crossovers are on track to be profitable successes -- even in a soft market.

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John Rosevear owns shares of Ford and General Motors. The Motley Fool owns shares of and recommends Ford. The Motley Fool has a disclosure policy.