GM Needs To Sort Out Its Production Constraints To Keep Its Slice Of This Fast Growing Market
General Motors (NASDAQ: GM) has been caught by surprise at the popularity of its mid-sized trucks, the Chevrolet Colorado and GMC Canyon. The U.S. mid-sized trucks market is a lot smaller than the full-sized trucks market, but it has grown rapidly in the past couple of years. In 2015, sales grew by close to 41%, and through the first half of the year sales have grown by 17%.
As you can see from the tables above, the growth has been driven to a large extent by GM’s two vehicles in this market segment. The same trend has continued in 2016. GM had not anticipated such demand for its vehicles and has fast run out of inventory. The Detroit-based auto maker produces these vehicles at its Missouri factory, which has been operating on three shifts and seeing frequent overtime work. The company also added extra equipment and tools to help sort out capacity issues earlier this year. Still, the supply issues haven’t been resolved. One thing that might help the company is the contract it signed with Navistar to assemble the Chevrolet Express and GMC Savanna vans, which are both manufactured in the same plant. This shifting of workload might free up some capacity for GM to produce the extra units of these two trucks. It was not long ago that Toyota’s mid-sized truck Tacoma had over two-thirds of the mid-sized truck market to itself, but GM is fast catching up. Moreover, with the entry of Honda’s Ridgeline and Ford’s plans to re-launch its mid-sized truck Ranger to the market again in 2019, time is short for GM to establish a stronghold in this fast growing market.
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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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