GM Sales Feel Pinch of Go-to-Market Strategy

General Motors reports July U.S. daily sales tumble 12%, as the automaker sharply reduced deliveries to rental-car companies and kept a lid on profit-sucking discounts at the expense of overall volume and additional downtime at assembly plants.

GM dealers sold 226,107 light vehicles last month compared with 267,258 in the same period last year, according to WardsAuto data. There was one fewer selling day in the month vs. year-ago, when the automaker says it enjoyed the higher volumes because of an incentive program to clear older models off dealer lots to make way for newer ones.

But the bigger impact on sales was rental business, where GM reduced deliveries 81% to 11,200 units as it executes a plan to focus on sales in the traditionally more profitable retail channel and exercise restraint on incentives. The result has led GM to cut U.S. car production this year, but also to rethink its product portfolio as coupes and sedans fall out of favor with buyers.

“We have strategically decided to reduce car production rather than increase incentive spending or dump vehicles into daily rental fleets, like some of our competitors,” says Kurt McNeil, vice president-U.S. Sales Operations at GM.

“We are working hard to protect the residual values of our new products and growing quality retail and commercial sales, and July’s ATPs reflect that discipline,” McNeil says in a statement.

The average transaction price of GM vehicles increased $1,000 year-over-year last month to $36,000.

GM’s car sales in the month dropped 28.7% compared with a 6.9% decline in truck deliveries. The automaker’s sales mix – 43,089 cars vs. 183,018 trucks – reflected the market’s continued demand for pickups and especially CUVs.

Sales at the automaker’s volume Chevrolet brand fell 11.9% to 151,502 units from 178,820. Deliveries of the Chevy Silverado large pickup, GM’s best-selling vehicle, were off 11.7% to 45,966 units from 54,116 while the newly redesigned Chevy Equinox 5-passenger CUV saw sales rise 11.8% to 23,524 copies from 21,882. The Chevy Colorado midsize pickup also posted a strong month with deliveries up 26.7% to 11,206 units from 9,195.

GM in July sold 1,971 copies of the all-new Chevy Bolt battery-electric vehicle, a low-volume CUV for the automaker but important to building an environmentally friendlier reputation in the market against startup rival Tesla. The California-based EV maker started sales of its Model 3 earlier this week, a first-ever product from Tesla aimed the mass market where GM operates.

Cadillac to soon stop some sedan sales to pursue more CUVs, de Nysschen tells media.

The Buick division of GM felt the market’s preference to trucks most acutely last month. Sales of the unit’s premium products sank 27.7% to 15,966 from 22,960. Deliveries of the LaCrosse large sedan and Regal midsize sedan were half of last year’s weak totals. Even the popular Encore small CUV faced tough sledding with sales down 2.5% to 6,488 from 6,923.

Cadillac sales slipped 18.6% to 11,227 from 14,431, although GM’s luxury unit did see continued strong demand for the XT5 5-passenger CUV with deliveries up 15.6% to 5,504 from 4,951. Cadillac President Johan de Nysschen told Reuters earlier this week his group soon would drop some sedans from its product portfolio to pursue the rollout of more CUVs.

GMC sales fell 3.6% to 47,412 from 51,137. Deliveries of the GMC Sierra large pickup were down 7.4% to 19,963 from 22,428. A redesigned Terrain 5-passenger CUV comes to the division later this year and likely will boost its future sales.

GM sales so far this year are off 3.9% to 1.63 million from 1.71 million in a market that is cooling off from seven years of record-high deliveries.

“U.S. auto sales continue to moderate from last year’s record pace, but key U.S. economic fundamentals remain supportive of strong vehicle sales,” says Mustafa Mohatarem, GM’s chief economist. “Under the current economic conditions, we anticipate the second half of 2017 will be much stronger than the first half.”

Inventories at the largest U.S. automaker have yet to catch up to the weaker demand despite production cuts, and dealer lots closed July with 939,831 vehicles in stock for a 104 days’ supply. GM wants to the finish the year with at least 100,000 fewer vehicles in stock, which it thinks will come as additional factory downtime and an historical upturn in season-ending demand occurs in the third and fourth quarters.

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