Global Insight Perspective | |
Significance | GM sold 4.6 million vehiclesin the first half of 2006, a 2.3% year-on-year decline. |
Implications | First-half sales figures at GM suffered on lower fleet volume in key U.S. and European markets and the high base comparison fed by incentives in 2005. |
Outlook | GM's second-half sales will struggle against the high base comparison months in the United States, and although its global sales in key emerging markets are encouraging, they are unlikely to provide the company with enough volume to offset the losses in the key North American market. |
General Motors (GM)'s global sales for the first half of 2006 fell 2.3% to 4.6 million vehicles due to lower U.S. and European fleet sales and the high, incentive-based comparison months of 2005 in the United States. Second-quarter sales of 2.4 million vehicles showed an 8.7% rise over the first quarter, but a fall of 7.6% year-on-year (y/y). GM's first-quarter sales were up 4.4% y/y on 2005.
“We are encouraged by the stabilization of our sales in the United States and the continued strength of our four global brands [Cadillac, Chevrolet, Saab and Hummer] outside of our home market,” said John Middlebrook, vice-president of global sales, service and marketing in a prepared GM statement. “Our global market share grew each month of the quarter, concluding at 14.5% share performance in June.”
GM’s global mass market Chevrolet brand recorded year-to-date (YTD) sales increases in Asia-Pacific of 40%, Latin America 15%, and Europe 12%, including some bright spots in some key individual emerging markets, with Brazil up 13% to 20,000 units, China up 81% to 30,000 units, India up 47% to 6,000 units and Russia up 47% to14,000 units. Second-quarter sales for Chevrolet stood at more than 128,000 units, a 13% increase over first-quarter results. Further growth for the brand is expected with the third-quarter introduction of the Chevrolet Silverado full-size pick-up truck in the United States, and the expanded availability of the Captiva sports-utility vehicle (SUV) in Europe and Asia.
GM's premium and specialist brands Saab and Hummer performed well with Saab's global sales rising 11% on the quarter and setting a record for the first half of 2006. Europe saw most of the volume and considerable growth of 24% compared to 2005. Hummer meanwhile saw sales jump 104%, with the U.S. market rising 89%, but still tiny in volume terms with just 15,000 units. Hummer is looking forward to strengthening its position with the production of a right-hand drive version of the H3 for markets outside North America, at GM’s South Africa assembly plant later this year.
Outlook and Implications
GM's first-half sales slip of 2.3% to 4.6 million vehicles is the price paid by the world's number one automaker for deliberately stepping away from some loss-making fleet business in both Europe and the United States. Combined with the extreme and one-off base comparison months of June and July of 2005 in the United States, where the employee discount campaign saw sales rise to unsustainable levels, this will result in GM struggling to maintain pace with 2005's overall global sales total of 9.17 million vehicles, a 47-year record and a 2% rise on 2004.
Lower fleet volume has been part of GM's strategy as it backs away from marginal and unprofitable business and is paying dividends in its bid to recover profitability (see United States: 27 July 2006: GM Posts US$3.18-bil. Q2 Net Loss Due to Restructuring Costs; Revenue and Operating Profit Rise).
GM can look forward to some positive input in the second half of 2006 from its redesigned Chevrolet Silverado pick-up and in Europe from the new Corsa. GM's growth in emerging markets will also bring some much needed volume and encouragement, but the generally flat nature of Europe and the North American markets and the decision not to chase market share and volumes will inevitably mean that achieving similar volumes to last year will be an impossible task.
With Toyota continuing its global expansion apace, the question of when Toyota will overtake GM may come sooner than initially predicted, with 2007 looking increasingly likely.