How Is General Motors Likely To Grow In The Next Two Years?
General Motors (NYSE: GM) is expected to display declining growth is revenue over the next two years due to falling sales volume from its largest market, North America. General Motors derives more than 75% of its revenue from its North American division, however, lower demand from this market is expected to have a material impact on its revenue going forward. Nevertheless, the company’s latest venture towards self-driving cars and electric vehicles is expected to provide some relief to the company’s top-line over the next few years.
General Motors’ revenue fell by ~17% in 2017, largely due to the sell-off of its European division, the Opel/Vauxhall operation, to Peugeot at the beginning of 2017. However, the decline in revenue was further exaggerated by a fall in revenue from the company’s North American division. Total sales volume from the company’s North American division declined by 11% in 2017 year-on-year (Y-o-Y). However, a rise in the per unit average price of 5% led to a total decline of 6% of the company’s revenue from its North American division. The fall in revenue is due to the changing consumer preferences in the region towards SUVs, pickups, and crossovers and a declining passenger car market which is lowering the demand for the products offered by the company. We expect the company’s North American revenue to fall at 3% annually over the next two years, receiving some support from higher prices. Despite this pessimistic outlook, we expect the company to overcome this declining trend as it continues to focus on differentiation with the launch of its new heavy-duties and SUVs.
The company’s International and Chinese division are expected to display minimal growth over the next two years. However, we expect the company’s financing division to remain a positive highlight for the company during this period. Despite an expectation of increased interest rates over the next two year period, we expect the company’s financing division to add $13.5 billion to its revenue in 2019, a CAGR of 5% over the next two years. GM Financial has been focusing on expanding its leasing and prime lending programs throughout North America, leading to a larger contribution to the company’s top-line. Higher wages in the U.S. are expected to slightly offset the impact of higher interest rates with expansion adding to growth.
Looking forward, General Motors’ increased focus and investment in self-driving cars and electric vehicles (EVs) are expected to add to the company’s growth over the next few years as they cater to the demand of the market. We have outlined our expectation for the company’s revenues in our interactive dashboard. You can make changes to our estimates to arrive at your own revenue estimate for the company.
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