General Motors (NYSE: GM) said that its sales in China rose 10.7% in October on strong demand for SUVs and big sales growth for two GM brands at opposite ends of the price spectrum.
Entry-level and luxury vehicles are both booming for GM right now
Continue Reading Below
Simply put, GM is seeing outstanding sales growth at both the low and high ends of China's new-vehicle market -- and not doing badly at points in between. In terms of sheer sales numbers, GM's biggest growth driver in China in October -- and in all of 2017 -- has been its Baojun brand.
The China-only Baojun brand was created to compete directly with lower-cost offerings from aggressive domestic Chinese automakers. It has succeeded wildly: Baojun sold 104,755 vehicles last month, up 56% from a year ago, on huge demand for its small 510 SUV.
In terms of percentage growth year over year, GM's biggest success has been at the other end of China's market. Cadillac's sales in China rose 36% last month, to 17,018 vehicles. (For comparison: GM sold 13,931 Cadillacs in the U.S. in October.)
As in the U.S., Cadillac is seeing strong demand for its XT5 SUV in China. But in China, unlike the U.S., Cadillac is also seeing strong sales of several of its sedan models. Year to date, Cadillac's sales are up 58%.
The gains weren't quite as dramatic, but GM's mainstream Buick and Chevrolet brands also did well in China in October. Chevrolet sales rose 17%, to 61,065, on good sedan demand, while Buick sales rose 2.1%, to 107,297, with sales of Buick's Envision crossover SUV topping 19,000 units.
GM's Wuling brand has had a tougher time in 2017. Wuling makes small, inexpensive minibuses and commercial vans. Its sales have faded with the end of China's building boom. Wuling sold 92,5889 vehicles in October, down 15% from a year ago.
Overall, through October, GM's sales in China are up 2% in 2017. That trails year-to-date gains of 8.5% for Toyota (NYSE: TM) and 17% for Honda (NYSE: HMC) -- though GM sells more vehicles than either -- but it's well ahead of Detroit rival Ford Motor Company's (NYSE: F) 5% sales decline this year.
GM has recovered nicely after a weak start to 2017
GM's sales in China suffered early in 2017 after the Chinese government cut a tax rebate it had offered to buyers of vehicles with small, fuel-efficient engines. But GM's profits didn't suffer significantly, as rising sales of more profitable SUVs and luxury vehicles more than offset the profit lost from those (less profitable) small vehicles. Even in the low end of the market, GM effectively traded very-low-profit Wuling sales for somewhat-more-profitable sales of Baojun vehicles.
The trade-off helped GM's Chinese joint ventures generate $459 million in equity income in the third quarter, unchanged from a year ago despite pricing pressure from those domestic Chinese automakers. With those trends continuing into the fourth quarter, GM appears to be setting up another good result from the world's (and GM's) largest new-vehicle market.
10 stocks we like better than General MotorsWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and General Motors wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of November 6, 2017