Morningstar

GM's Q2 Sales Have Bright Spots Despite Low Inventory

We expect gradual inventory improvement throughout the year.

Securities In This Article
General Motors Co
(GM)

Automakers' June U.S. light-vehicle sales showed robust growth against a very soft comparable in June 2020 due to the pandemic. Wards puts the industry's year-over-year growth at 17.8%, but we calculate a 14.1% decline versus June 2019 (one selling day fewer in June 2021 versus June 2019). Wards puts the seasonally adjusted annualized selling rate at 15.36 million versus 13.02 million for June 2020 and 17.18 million for June 2019. The semiconductor shortage ravaging the auto industry should bottom out in mid-2021, so we expect gradual inventory improvement throughout the year, though we expect a full recovery to take until 2022 or even 2023. The good news is that demand is excellent, with many consumers ready to spend money after holding back vehicle spending last year due to the pandemic. General Motors' GM second-quarter sales rose 39.7% from the second quarter of 2020 and to us did not look as bad as they could be, given the tight inventory. We calculate GM's sales fell 7.8% compared with the second quarter of 2019, but two of its four U.S. brands, Buick and GMC, actually increased sales versus the second quarter of 2019. We calculate Buick's volume rose 19.1% from two years ago while GMC's grew 0.9%. GMC had a record second quarter and its best first-half volume since 2005, with GM calling out the new Yukon SUV's contribution. Buick, which is now a light-truck-only brand in the U.S., had its best quarter in over 15 years per GM, helped by the brand's top model, the Encore GX crossover, posting a record quarter. Pricing should be helped by the Cadillac brand, which had its best retail channel (nonfleet) volume since the second quarter of 2015, and we calculate Escalade full-size SUV sales grew 15.3% versus the second quarter of 2019. GM likely benefited from Ford's semiconductor-related F-150 production woes, with GM citing J.D. Power PIN data of second-quarter retail market share for its full-size pickups rising 450 basis points year over year to 40.6%.

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About the Author

David Whiston, CFA, CPA, CFE

Strategist
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David Whiston, CFA, CPA, CFE, is a strategist, AM Industrials, for Morningstar*. He covers stocks in the automotive industry, including dealerships, parts manufacturers, and automakers. He has covered the automotive industry since joining Morningstar in 2007. He writes stock reports, ad hoc reports, stock analyst notes, and builds discounted cash flow models for each company covered. He also assesses their economic moat and makes frequent television and print media appearances in local, national, and international news outlets. Key stocks covered include GM, Ford, CarMax, and all six publicly traded franchise auto dealers, such as AutoNation and Penske Automotive Group.

Before joining Morningstar in 2007, Whiston spent four years in PricewaterhouseCoopers’ New York real estate audit practice and one year in its Chicago office working on real estate acquisition due diligence, gaining experience around assessing an asset’s cash flow.

Whiston holds a bachelor’s degree in business administration with a concentration in accounting from the University of Richmond’s Robins School of Business. He also holds a master’s degree in business administration with concentrations in finance, economics, and organizational behavior from the University of Chicago Booth School of Business. He holds the Chartered Financial Analyst® designation, and he is a Certified Public Accountant and a Certified Fraud Examiner.

In 2012, he ranked first in the specialty retailers and services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey. He ranked first in the same industry in 2011 .

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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