General Motors (GM) shares stalling out after disclosing huge drop in deliveries
3:27 pm Friday, October 01st, 2021
The global chip shortage tightened its grip on the auto industry in Q3, as reflected in General Motors’ (NYSE:GM) disappointing sales report for the quarter. With dealer inventories sinking to historically low levels due to chip shortage-induced production cuts, GM’s total deliveries plunged by nearly 33% yr/yr to 446,997 vehicles. Adding to the concern is that GM, and rival Ford Motors (F), announced additional reductions yesterday as the companies idle certain plants. Specifically, GM extended the production halt of its Chevrolet Blazer at its Ramos plant in Mexico by two weeks, while Ford plans to pause manufacturing of its Mustang and Transit vehicles.
The saving grace for GM is that consumer demand remains incredibly resilient, even in the face of skyrocketing prices. For some context, GM’s average transaction price (ATP) in Q1 reached a record of $40,353. That record has since been smashed as the ATP soared to $47,467 in Q3. A combination of low interest rates, pent-up demand, stimulus programs, increased trade-in values, and a tight labor market has fueled the upswing in prices. Additionally, consumer demand for full-size SUVs and pickup trucks, which carry higher ATPs, has been especially strong.
On a related note, GM stated that its retail share of the full-size pickup market increased by more than 2 percentage points, bolstered by strength in the Chevrolet Silverado and GMC Sierra models. Similarly, the full-size SUV segment was a standout with the Suburban (+28%) leading the way. The Yukon also posted strong results with sales up 24%.
Another positive is that momentum continues to grow for GM’s upcoming electric vehicle (EV) lineup. Most notably, the company stated today that reservations for its all-electric 2023 Cadillac LYRIQ Debut Edition were filled in just over ten minutes. Like Ford, which announced ambitious plans to build massive new EV facilities in Tennessee and Kentucky this week, GM is staking its future on the successful rollout of new EVs. Recently, GM announced that it intends to boost its capital investments in EVs and self-driving technology by $8 bln to $35 bln from 2020-2025. These investments are expected to support the launch of 30+ EV models in North American and China by 2025.
