GM Expected To Report Strong Q3 Numbers, Though They Will Face Tough Year-Over-Year Comps

October 24th, 2016 by Trefis Team
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General Motors (NYSE:GM) is set to report earnings for the third quarter of fiscal year 2016 on Tuesday, October 25. The Detroit based auto maker reported an 11% year-over-year growth in its top line and a 380 basis point expansion in operating margin. The company achieved this despite a reduction in units sold in North America and lower market share in China. U.S. Sales have been at a very high level over the last couple of years and, as a result, monthly new vehicle sales numbers have suffered on year-over-year comparisons. For example, new vehicle sales in September fell by 0.5% year over year industry wide with GM sales falling 0.6% year over year.

On a year-to-date basis, GM’s U.S. sales have declined by close to 4%, with sales of all brands except Buick declining. Cadillac has shown the biggest decline so far, with year over year sales down 5.1% compared to last year’s sales. Another worrying trend for the company has been the decline in pick-up truck sales. GM reported a record year of profitability in 2015 as a result of the gain in market share its pick-up trucks Chevrolet Silverado and GMC Sierra experienced while inventory levels of Ford’s pick-up trucks at its dealerships were low. However, on a year to date basis, sales of Chevrolet Silverado are down 3.5% while sales of GMC Sierra are up 1.7%. In contrast, sales of the F-150 series of trucks are up 5.5% compared to a year ago. In the month of September, GM’s truck sales declined by 13.6%, with Silverado sales declining by 15.5% and 8.5%. For the whole quarter ending September, GM’s new vehicle sales declined by 2.6% compared to the same quarter in fiscal year 2015. Buick and Cadillac were the only two GM brands posting increases in unit sales, but since they make up only around 1/6th of the company’s total sales, the combined impact was not enough to offset the decline in Chevrolet and GMC sales.

gm q3 numbers

Compared to the U.S. market, China has grown considerably faster. Through the January-September period, industry wide sales in China are up by close to 15% on the combined impact of a lower sales tax on small engine vehicles and high discounts offered by many automakers. The SUV and Crossover segments have benefited especially as a result with comparative sales up by close to 50%. GM’s Buick and Baojun brands have reaped the benefits of this trend. Additionally, Cadillac sales in China have done really well in the recent months. Through the January-August period, Cadillac sales had increased by 31%, with sales in August growing by close to 93%. However, since discounts have been higher, the equity realization on these unit sales might be lower than usual for the company.

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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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