General Motors (GM, Financial) recently reported its sales figure for the month of June. While sales volume in the U.S. dropped 3%, it remained unchanged in China. The automaker’s lackluster performance in these key markets may have spoiled investors' moods. However, despite the lower numbers, there are some positive takeaways. General Motors appeared pretty happy with its overall performance in the U.S. Here’s a closer look at the Detroit automaker’s performance in the two markets and why the company is optimistic with the way things are shaping up.
Sales drop in the U.S.
General Motors recorded a sales decline of 3% in the U.S. Though the market for pickups and crossovers remain quite strong, it was offset by shrinking sales in rental-car fleet. The automaker plans to shift away from rental-car fleet sales. While rental-car fleet sales is a good method of promoting and popularizing various models to fresh buyers, higher sales could eat into the company’s profits and lower margins.
Fleet sales of rental cars went down in the last month, but the carmaker had a stupendous month in terms of retail sales which make huge profits. Retail sales shot up 6.8% in June, the best since 2011. The rise in retail sales was led by the Chevrolet and GMC divisions. Pickup trucks and SUVs were the top choices of buyers, which also happens to be one of the most high-profit segments for GM. General Motors said that sales volume of its full-size pickups Chevrolet Silverado and GMC Sierra jumped 18% and 21%, respectively.
General Motors said around 20% of its business generation is in fleets. The company is balancing the decline of rental-car sales through pitching its models for fleet sales to corporate bodies and government units.
The automaker is glad to note that it was able to register a strong first half by wrapping up "the U.S. auto industry's best six months in a decade, driven by strong demand for pickups and crossovers," according to GM vice president of sales Kurt McNeil. General Motors is pretty confident to finish the year on a high note. McNeil added, "People feel good about their jobs and the direction the economy as a whole is taking, so the second half of the year should be strong too."
Sales stats in the top international market
Apart from the U.S., China is a crucial market for General Motors. The company has been selling cars in greater numbers in this Asian economy than in its domestic market. In the first half of 2015, General Motors managed to deliver approximately 1.72 million cars and trucks in China. This is an increase of 4.4% compared with last year same period.
For the month of June, the top American automaker sales volume came in at 246,066 units. The company virtually saw no improvement in China over the last year as it was unable to stimulate demand in the slowing economy. General Motors’ sales fell 4% and 0.4% in May and April, respectively. In an effort to spur demand in the country, the carmaker also slashed prices of 40 models sold in the country in May. But this doesn’t seem to be attracting buyers enough as the Chinese economy is witnessing its slowest ever growth seen in over two decades. General Motors is also sensing a shift in customer preferences in the economy in favor of SUVs and MPVs. According to company spokesperson Irene Shen, this is somewhat hurting the sedan and mini commercial segment.
General Motors is working to develop its product mix to best suit the changing and diversifying taste of the Chinese population. The company’s China president Matt Tsien said "We will continue to add more new and refreshed models in the second half to keep up our growth momentum."
The takeaway
General Motors is working to play its cards right to evolve and stay competitive in its key markets. China is a critical market for the automaker, particularly as it accounts for a substantial part of its overall sales volume. However, things should get better once the carmaker introduces more models and the economy picks pace. As far as the U.S. is concerned, General Motors' strategy of focusing on retail sales will work well for the company.
