Weekly Auto Notes: General Motors

-8.32%
Downside
45.35
Market
41.57
Trefis
GM: General Motors logo
GM
General Motors

We have written about the importance of the Cadillac brand to General Motors (NYSE:GM) in the past. The performance of Cadillac against Audi and Lexus, the premium car brands of competitors Volkswagen and Toyota, will not only decide where GM finishes in the race for the position of the World’s Biggest Carmaker by unit sales numbers, but also influence the margins for the company and hence its long term strategy. Consequently, GM has been trying hard to revive the Cadillac brand in the U.S.

In 2014, Cadillac’s older models have all posted gains in the number of unit sales, with the Escalade SUV the biggest gainer at a sales growth rate of 35% on a year-to-date basis [1]. GM launched a re-modeled version of the Escalade late last year. The model refresh has been extremely successful and sales of the model has nearly doubled so far this year. GM now holds  a 37% market in the large luxury SUV segment. [1]

Another Cadillac model to post a sales increase this year has been the SRX crossover, which is benefiting from the surging popularity of small utility vehicles. However, GM might not be able to cash in on this trend as small utility vehicles will be one of the last segments to be refreshed by the company. Cadillac is expected to offer a redesigned SRX for the 2016 model year. GM also has plans to introduce two more Cadillac crossovers around 2017. The luxury crossover market is booming but GM has decided to focus on updating other models before its SUVs and crossovers. Consequently, it is hard to foresee Cadillac posing a credible challenge to the likes of BMW, Mercedes and Audi.

Relevant Articles
  1. Down 12% YTD Will General Motors Q3 Earnings Help It Rebound?
  2. Rising Volumes And Cooling Inflation Will Drive GM’s Q2 Results
  3. What To Expect From GM’s Q1 Earnings?
  4. What’s Next For GM After A Solid Q4?
  5. Company Of The Day: General Motors
  6. With Deliveries Picking Up, How Will GM Fare In Q3?

Now, it looks like GM is set to introduce another technology into the market through the Cadillac brand: the self-driving car. Earlier this month, GM CEO, Mary Barra, announced that the company would put its “Super Cruise” system, which can drive a car automatically in some circumstances, into an unspecified 2017 Cadillac Model. This development seems motivated by a desire to close the gap on German competitor Daimler. Global Mercedes S-Class sales have more than doubled this year, following the introduction of a self-driving production system to the S-Class. Currently, this contributes a big competitive advantage and competitors like Volkswagen, BMW, Toyota and GM have nothing similar. But it seems as if GM is stepping up the competition with this announcement.

GM’s stock price stayed stable around the $34 mark this week. We maintain our ~$40 price estimate for GM, which is still about 15% above the current market price. We estimate revenues of about $167 billion for GM in calendar year 2014.

View Interactive Institutional Research (Powered by Trefis):

Global Large CapU.S. Mid & Small CapEuropean Large & Mid Cap
More Trefis Research

Notes:
  1. General Motors U.S. Sales Up 9 Percent To 100,122 Units In July 2014: By The Numbers, GM Authority, August 2014 [] []