GM’s November Truck Sales Rally Didn’t Last Long
General Motors (NYSE:GM) reported record profits in the U.S. last year on the back of high pick-up truck sales. As Ford scaled back production of its F-150 pick-up truck and stuffed dealerships with high inventory levels in 2015, GM saw its pick-up trucks Chevrolet Silverado and GMC Sierra post higher combined sales than Ford’s F-150. However, that trend hasn’t been sustained in 2016.
In the full year 2016, overall GM truck sales declined by 3.4%, with sales of Chevrolet Silverado declining by 4.3% and GMC Sierra declining by 1.1%. In comparison, Ford F-150 sales increased by 5.2%. In the month of November, GM experienced a slight increase in truck sales on the back of a 14.3% surge in GMC Sierra sales but a 15.1% decline in December combined with a 14.2% slide in Silverado sales all but cancelled out its impact.
Since truck sales have a much higher average transaction price and production costs are not that much greater than those for other vehicle segments, they command much higher margins. Having a higher mix of truck sales in the overall sales mix tends to lead to much higher profitability. GM’s profitability levels in 2016 haven’t been as high as those in 2015 but they have still been much higher than historical profit levels. However, if truck sales keep sliding, especially as the Japanese automakers Honda, Toyota and Nissan expand their production of pick-up trucks, this profit stream could potentially be threatened.
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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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