Why Future U.S. Truck Sales Can Decide GM’s Fate
In recent years, sales of SUVs, Crossovers and Trucks have experienced a boom in the U.S. As you can see from the table below, sales of crossovers and trucks combined have grown by 11% over the 2013-2015 period, compared to a 0.1% increase in car sales.
GM rode this wave to a year of record profitability in 2015. Its market share in trucks and crossovers combined has increased by 30 basis points compared to a 180 basis point decline in its market share in the cars segment. Moreover, GM gets close to 60% of its sales in the U.S. from trucks. As a result of its dominant position in this market, the company is expected to continue to capture significant value from the SUV/Trucks boom. We currently forecast the number of trucks sold in the U.S. to grow at a rate of 2% for the rest of our forecast period. However, if the market grows at 4% instead of 2%, our target price for GM could increase by 37%. If the market stays flat for the rest of our forecast period, i.e. is sales do not either grow or decline, our target price for GM could decline by 32%.
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Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for General Motors
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