On Tuesday, General Motors (NYSE: GM) reported a steep decline in U.S. deliveries for the first quarter. The company and its dealers delivered 665,840 vehicles in the domestic market in Q1 2019, down 7% from 715,794 a year earlier.
Despite this disappointing sales performance, GM's crossover lineup continued to achieve sales growth last quarter. Given that the General is cutting production capacity for traditional sedans and is early in a multiyear transition to upgraded versions of its full-size SUVs and pickups, the continuing strength of crossover sales is a promising sign.
Crossover sales rise again
Three months ago, General Motors reported a 7% increase in domestic crossover deliveries for 2018 as a whole, including a 14% surge in the fourth quarter.
Image source: General Motors.
U.S. auto sales slowed in early 2019, as events like the federal government shutdown and a late-2018 stock market swoon hurt consumer sentiment. As a result, during the first quarter, GM wasn't able to deliver the same level of growth in the crossover market that it achieved last year.
Still, sales trends did remain in positive territory. For GM as a whole, crossover sales crept up 3.1% last quarter. This consisted of a 0.5% decline at Buick, a 10% drop at GMC, a 6.6% increase for Chevrolet, and a 36.8% surge for Cadillac.
The Cadillac luxury brand's outperformance was not surprising, as the brand introduced a second crossover model (the XT4) to its lineup last fall. The XT4 has already become the best-selling model in its segment. A third Cadillac crossover will hit dealer lots later this year, adding to the brand's momentum.
Meanwhile, the Chevy brand's growth in the crossover market was powered by strong demand for the Chevy Equinox. In 2018, Equinox deliveries jumped 14.5% to 332,618, gaining ground on the segment leaders: Toyota's (NYSE: TM) RAV4, the Nissan (NASDAQOTH: NSANY) Rogue, and Honda's (NYSE: HMC) CR-V. Still, the Equinox didn't come close to unseating any of those models on the leaderboard. Honda delivered 379,013 CR-Vs in the U.S. last year, while the Toyota and Nissan models easily eclipsed 400,000 deliveries for the full year.
The Chevy Equinox is gaining share in the compact crossover market. Image source: General Motors.
By contrast, the Chevy Equinox surged ahead of its competitors from Toyota and Honda last quarter, with a 7.4% jump in deliveries (to 88,500). The Nissan Rogue still took first place, but with a 19.4% plunge in deliveries (to 93,814), it has only a tenuous advantage.
Car sales continue to decline
Of course, given that General Motors' total domestic deliveries fell last quarter, sales gains in the crossover market came at the expense of steeper declines in other parts of the market. Indeed, GM's non-crossover sales plunged nearly 13% in the U.S. in Q1.
Some of the biggest declines came from the half-dozen GM car models that are being phased out in conjunction with ending production at several plants in North America. The Buick LaCrosse; Cadillac CT6 and XTS; and Chevy Cruze, Malibu, and Volt models all posted sales declines in the U.S. last quarter. Deliveries of those six models combined plunged 33%, from 71,831 to 47,914, accounting for nearly half of the drop in GM's domestic deliveries.
Investors shouldn't be worried about GM's falling car sales, though. Toyota and Nissan also posted double-digit sales declines in the car market last quarter. Furthermore, GM reported decent delivery numbers for the car models that aren't being discontinued, including sales increases for the two highest-volume models: the Chevy Malibu and Chevy Camaro.
The dip in truck and SUV sales is likely temporary
The steep decline in GM's deliveries of full-size SUVs and trucks would seem more problematic, at first glance. GM's domestic sales volume in these highly profitable segments fell by about 30,000 units last quarter: a nearly 13% drop.
However, GM is still in the early innings of transitioning to a new platform for its full-size trucks and SUVs. The ongoing changeover is probably depressing demand for the outgoing models. Meanwhile, supply is still extremely tight for GM's next-generation light-duty pickups, and the upgraded heavy-duty pickup and full-size SUV models aren't even available yet.
Industry sales trends have been improving steadily since the beginning of 2019. If that trend continues over the next few quarters, it will coincide nicely with rising supply of the 2019 Chevy Silverado 1500 and GMC Sierra 1500, and the launch of GM's next-generation heavy-duty pickups and full-size SUVs.
The combination of continued growth in the crossover market and a likely rebound in the full-size pickup and SUV segments is a recipe for strong sales and earnings results at General Motors for the remainder of 2019 and 2020.
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