The second quarter was the best of times and the worst of times for General Motors as the automaker reported a nearly 40% boost in new-vehicle sales but still struggled with tight inventory.
Strong demand for pickups and SUVs helped drive sales and supported GM’s strategy of pushing semiconductor chip parts to those vehicles to make sure it could supply dealers and consumers.
At Matick Chevrolet in Redford, for example, inventory of new cars in June was the worst it’s been all year, said Paul Zimmermann, vice president and owner. Yet, the dealership had strong sales, selling 280 new and 166 used cars, which is relatively consistent with June sales in previous years, not counting last year when it had the constraints of COVID-19, Zimmermann said.
“There’s high demand so everything that we receive we’re turning almost immediately,” Zimmermann said. “We have a 12-day turn rate; in years past it was 112 days. It’s a matter of continuous communication with customers to let them know what’s en route, then being efficient in getting it delivered to them when it arrives. We’ve gained a ton of efficiency and reduced a lot of waste.”
The dealership reflects GM’s nationwide sales. GM reported it sold 688,236 new vehicles in the U.S. in the quarter compared to 492,489 vehicles in the year-ago period. Still, GM characterized it as a “unique” market.
“The U.S. economy is accelerating, consumer spending is robust and jobs are plentiful,” said Elaine Buckberg, GM chief economist. in a statement. “Consumer demand for vehicles is also strong, but constrained by very tight inventories. We expect continued high demand in the second half of this year and into 2022.”
GM will report its second-quarter earnings on Aug. 4.
Pickup sales soar
In the quarter, GM reported sales of its highly profitable Silverado light-duty and heavy-duty full-size pickups rose 34.5% to 164,731. Sales of the GMC Sierra pickups increased 40.3% to 75,495.
During the quarter, GM earned 40.6% of the retail market for full-size pickups, up 4.5 percentage points year over year, according to J.D. Power PIN data.
“General Motors delivered solid Q2 results, but most noticeably in its pickup truck lineup which undoubtedly gives the biggest boost to its bottom line,” said Jessica Caldwell, Edmunds executive director of insights, who went on to a comparison with crosstown rival Ford. GM’s “truck inventory situation seems to be faring better than its Dearborn rivals, but the next few months should continue to be tough,” she said. “GM will need to continue to work its magic in maximizing those chipsets and keep those trucks rolling off the line to stay on top.”
Sales of GM’s redesigned full-size SUVs, which also produce robust profit margins, also soared. GMC Yukon sales were up 126% to 23,857. GM reported a 90.6% gain in sales of Chevrolet Suburban to 13,373 sold. Sales of the Chevrolet Tahoe rose 74.3% to 27,908 and sales of the Cadillac Escalade rose 120.3% to 10,874.
Total Chevrolet sales increased by 31%, with the Bolt EV and Traverse midsize SUV both delivering their best-ever second-quarter sales and best first-half sales. Cadillac’s total sales increased by 55%, leading to Cadillac’s third consecutive quarter of year-over-year growth.
Fleet sales, which are about 14% of GM’s total sales, were severely impacted by pandemic shutdowns a year ago. GM said they are beginning to recover as GM prioritizes production of its most in-demand vehicles. Fleet deliveries rose 69% in the quarter compared to the year-ago period.
“The agility and creativity of our supply chain, purchasing, engineering and manufacturing teams, in collaboration with our suppliers and dealers, have helped us continue to satisfy customers and gain market share in some of the highest-demand segments of the market,” Kurt McNeil, GM’s U.S. vice president of sales operations, said in a statement.
Analysts cannot provide GM’s second-quarter U.S. market share until they get all automakers’ sales results. Ford Motor Co. reports its sales on Friday. But GM’s U.S. market share in the first quarter was 16.4%, its lowest for any first quarter since 2015, said Michelle Krebs, executive analyst at Cox Automotive.
‘Tempered enthusiasm’
Like all automakers, GM had battled a worldwide shortage of semiconductor chips, used in various car parts, since the first part of the year.
The chip shortage is a result of the COVID-19 pandemic, which increased demand for personal electronics such as cellphones and laptops that the chips are used in.
More:Everything you need to know about the chip shortage that’s plaguing automakers
GM has had to temporarily idle several plants across North America and stopped production at facilities in South Korea and Brazil because it, like crosstown rivals Ford Motor Co. and Stellantis, can’t get parts. Ford and Stellantis have had to idle production across many plants, too. At one point, GM had tens of thousands of light-duty pickups and SUVs parked across the country that were partially built and awaiting the chip parts.
But in early June, GM said it would increase production of nearly all its vehicles. GM has been able to bring nearly all of its assembly plants back up by strategically redirecting the chip parts it could get to the vehicles that are in highest demand and generate the fattest profits. It also said it would increase production at Flint Assembly, where it builds its heavy-duty full-size pickups, by 1,000 vehicles a month staring mid-July. GM will also pull-ahead full-size pickup production to Oshawa Assembly in Canada to start at the end of the year rather than next year.
As of Wednesday, here is GM’s latest production status, according to GM spokesman David Barnas:
- Fairfax Assembly in Kansas City, Kansas: Remains down through the week of Aug. 16. GM makes the Chevrolet Malibu and Cadillac XT4 sedans there.
- Lansing Grand River Assembly: Production of the Cadillac CT4 and CT5 sedans are down through the week of Aug. 9. But GM is still building the Chevrolet Camaro at Lansing Grand River.
- Wentzville Assembly in Missouri: GM makes its Chevrolet Colorado and GMC Canyon midsize pickups, as well as full-size vans, there. It is down for a few weeks for a planned retooling of the facility.
- CAMI in Ontario: The plant that builds the Chevrolet Equinox SUV is running this week, but will go down for its annual two-week summer shutdown starting July 5. CAMI will then take additional down weeks and resume production the week of Aug. 2.
GM said shipments of Colorado and Canyon pickups will increase by about 30,000 units from mid-May through early July as Wentzville workers finish testing those that were partially built but held at the plant due to semiconductor supply disruptions.
“Although the situation remains fluid, we’re focused on continuing to leverage every available semiconductor to build and ship our highest demand products,” McNeil said.
GM ended the quarter with 211,974 units in inventory, down from 334,628 at the end of the first quarter.
“Right now, we’re at the lowest new car inventory amount,” Zimmermann said. “But we have many vehicles in transit so I’m still confident we’ll have as strong of a month in July as June was.”
Zimmermann said it is still tough to gauge just how many new cars he will get because GM’s build-shy strategy, where it partially builds a vehicle and parks it to await a chips part, is listed as “in transit.”
“There are 240 vehicles in transit to us, which is an improvement but it’s tempered enthusiasm until they arrive,” Zimmermann said.
Big profits
Despite the chip shortage, GM released strong first-quarter earnings in May. GM CEO Mary Barra said at the time that GM expects to have a strong first half with adjusted earnings before interest and taxes of around $5.5 billion. GM reaffirmed its full-year guidance, “based on what we know today,” coming in at the higher end of the $10 billion to $11 billion EBIT-adjusted range that it shared earlier this year.
The automaker reported a first-quarter net profit of $3 billion, up from $294 million for the first quarter a year ago. GM said it sold 642,250 total new vehicles worldwide in the first three months of the year compared with 618,335 sold in the same period a year ago.
The lack of chips has pushed GM to prioritize its most profitable vehicles by cutting production on other models, mostly sedans. GM has changed some of the components it places in its vehicles, too, such as GM building certain 2021 light-duty full-size pickups without a fuel management module, since March. Then in June, GM said it would make some 2021 full-size, light-duty pickups and SUVs without the Automatic Stop/Start feature because of the chip deficit.
And, GM delivered fewer vehicles to dealerships. The result has been unheralded lease pullback deals for consumers, but with short new car inventory, buyers have little room to negotiate on the sticker price.
More:Chip shortage makes finding perfect car a challenge but could help get you out of a lease
The sweet spot
Since June 7, Cox Automotive reports the national average days’ supply for the industry was 30, the lowest since it began tracking inventory affected by the chip shortage, and down from 34-47 in previous weeks. For Chevrolet, there is just a 20-day supply of the Silverado pickup and Suburban SUV, a 15-day supply of the Tahoe SUV and a 4-day supply of the Corvette.
The result is that the average listing price for a new car rose by $50 to a near-record $40,716, Cox Automotive data showed. New car prices have been on a steady rise since April. The latest average listing price was 6% above the same week in 2020 and 11% above the same period in 2019.
The average listing price is what dealers are listing the price as, Krebs said.
“We do think that vehicles are selling near or at least, some even over,” Krebs said.
Used vehicle inventory rose slightly in the quarter and while prices have been retreating from their spring peak. The average listing price of used vehicles still was up by $180 to hit a new record of $24,589, 25% above the year-ago quarter, according to Cox Automotive data.
Dealer Zimmermann is confident the first-half inventory challenges will improve for both dealers and car buyers.
“Hopefully, everybody’s learned a little bit from this that in times of challenge, efficiency is gained,” Zimmermann said. “There are higher transaction prices for customers, but their asset will not depreciate at as fast a rate when there is a limited supply versus when the market is flooded. I hope we can find a sweet spot where we have more, but not as much as we did before.”
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Contact Jamie L. LaReau at 313-222-2149 or jlareau@freepress.com. Follow her on Twitter @jlareauan. Read more on General Motors and sign up for our autos newsletter. Become a subscriber.