GM's crossover SUVs continued to sell very well last month. Sales of the GMC Terrain were up 16%. Image source: General Motors
General Motors said its U.S. sales rose 2% in November, a good result driven by strong sales of trucks and "crossover" SUVs.
The company's retail sales were up 4%, ahead of the overall market. That retail sales gain was partially offset by a planned decline in sales to rental-car fleets.
The key numbersGM's average transaction price rose to $35,800 in November. That's a record. It's up about $740 from last month, and up about $580 from November 2014, according to J.D. Power numbers cited by GM. Strong transaction prices suggest that customers are opting for better-equipped (and more profitable) models. They typically translate into strong profit margins, and GM's margins in North America have been very good recently.
There were a few things driving that pricing gain. First and foremost: strong sales of profitable trucks and SUVs. Across the industry (and to some extent, around the world), buyers are shifting away from sedans and buying more SUVs, particularly car-based "crossover" SUVs.
The flip side is that sedan sales are suffering across the industry, and GM's sedans are no exception. (One exception: Chevrolet Volt sales were up 48% in November, thanks to a well-received all-new model.) But for companies like GM, with strong SUV lineups, that's a fine trade-off: Generally speaking, SUVs are more profitable (and priced higher) than sedans.
GM's SUVs have been selling extremely well, and that continued in November. Retail sales of Chevrolet-brand crossovers were up 26%, and Buick, GMC, and Cadillac crossovers all posted significant retail sales increases.
GM's pickups did well, too. The full-size Chevy Silverado gained 5.1% over a good year-ago result -- and that was despite a retail sales surge from arch-rival Ford , which finally has full supplies of its new F-150 after months of shortages. The midsize Chevy Colorado and GMC Canyon pickups also continued to post good sales.
Not all of the news was good. Sales of the Silverado's plusher (and slower-selling) twin, the GMC Sierra, were down almost 27%. GM didn't explain the decline, but it could suggest that the higher-end versions of Ford's new pickup are stealing sales disproportionately from the Sierra.
A note about year-over-year comparisonsLast month had two fewer "selling days" than November 2014. "Selling days" exclude days like Sundays and holidays when new-car dealerships are typically closed. GM's sales gains for November (and those of its rivals) may appear modest. But this was a good month for GM.
Fleet sales drop, but that's not a bad thingGM's sales to rental-car fleets fell 16% in November. GM said that was a planned decline as the company has been working to reduce its reliance on rental-fleet sales. Commercial and government fleet sales rose slightly. GM's total fleet sales were down 9% versus November 2014.
GM reins in incentive spending a bitCiting J.D. Power numbers, GM said that its per-vehicle incentive spending in November was 10% of average transaction prices, down 1.6 percentage points from October and down 1.2 percentage points from the year-ago month.
CEO Mary Barra and other senior GM executives have emphasized "discipline" on incentive spending. Incentives can boost sales, but they cut directly into per-sale profits. Barra has prioritized the preservation of good profit margins over incremental sales gains. GM's incentive spending is not low by industry standards, but it's consistently more restrained than it was as recently as a couple of years ago, a good trend.
GM noted that the industry's average spending was 10.5% of average transaction prices in November. Several import brands have been very aggressive with incentives in recent months, as the overall market's year-over-year gains have slowed.
The upshot for GM investorsThe year-over-year gains may look subdued, but this was a good month. GM continues to "walk its talk," emphasizing profitable retail sales, ratcheting back rental-fleet sales, preserving very strong transaction prices, and seeing continued strong demand for its well-regarded and highly profitable crossovers and pickups. It's a good formula.
The article General Motors' Prices Stay Strong as SUV Surge Continues 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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