General Motors: Strong Truck Sales Are Setting Up Another Big Quarter
The ongoing success of GM's crossover SUVs, including the big GMC Acadia, helped drive a retail market-share gain for the General last month. Source: General Motors.
General Motors said on Tuesday that its U.S. retail sales rose 6% in August, on continued strong sales of SUVs and pickups.
Including a big drop in fleet sales -- which GM has been working to reduce -- GM's sales were roughly flat versus a strong year-ago result. Most analysts had expected a small decline because of the timing of the Labor Day holiday weekend.
But GM managed a gain at retail thanks to continued strong demand for its trucks and crossover SUVs.
Why analysts expected sales to decline Nearly all of the major automakers were expected to report year-over-year sales declines in August. That's not because of concerns about the market, it's because of the calendar. Last month had one less "selling day" than August 2014 (many auto dealers are closed on Sundays) and Labor Day weekend -- traditionally a hot time for car sales -- is later this year.
But GM, like several of its rivals, beat expectations and posted a good month. That was especially true on the retail side of the ledger. GM said in a statement that it gained more than 1 percentage point of retail market share versus last August -- and it did so while maintaining high average transaction prices.
The secret to that success? SUV and truck sales are booming, and GM's entries are doing particularly well.
Continued strong sales of profitable pickups and crossover SUVs Sales of GM's full-size pickups continue to show great strength. Chevrolet Silverado sales rose 12%, while its upscale GMC Sierra sibling gained 7% over good year-ago results. GM likes to brag that the Sierra line has the highest average transaction prices of any pickup line in the industry; all of those sales bring home good profits for the General.
GM's midsize pickups are also doing well. One indicator of demand is what the industry calls "days to turn," which is the average number of days a vehicle spends on a dealer's lot before being sold. Anything under 30 days is considered pretty strong; the Chevy Colorado is "turning" in 19 days, GM said.
The Colorado and its GMC Canyon sibling have together been selling close to 10,000 units a month. That's not a lot -- Toyota has been selling about 15,000 Tacomas a month recently -- but the quick "days to turn" for the Colorado suggests that GM may be running up against the limits of its production line for the twins.
GM's crossover SUVs are also doing well. From small crossovers like the Buick Encore (up 29%), to midsize models like the Chevrolet Equinox (up 18%) and Cadillac SRX (up 52%), to the full size GMC Acadia (up 10%) and Buick Enclave (up 27%), GM is having success across the board with these models.
A note about the big drop in fleet salesGM posted great results at retail, but its overall sales were flat. That's because fleet sales were down sharply -- and that's no accident.
GM CEO Mary Barra has been working to roll back the company's longtime dependence on sales to rental-car fleets, which tend to bring thin profits -- and also depress resale values when waves of used-up rental cars come on to the market after a couple of years. GM's rental-fleet deliveries were down about 15,000 units in August, or about 38%.
Other kinds of fleet business are considered more desirable. GM competes hard for commercial- and government-fleet business, and the company posted small gains in both areas in August.
The upshot: GM is on track for another good quarterLong story short, it was another solid month for the General. GM posted very strong profit margins in North America in the second quarter, thanks to surging demand for its pickups and SUVs. We're now two-thirds of the way through the third quarter, and GM's sales and pricing in the U.S. continue to look very strong. That bodes well for the bottom line.
The article General Motors: Strong Truck Sales Are Setting Up Another Big Quarter originally appeared on Fool.com.
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