Last week, General Motors (NYSE: GM) reported that it closed out 2018 with a second consecutive decline in its quarterly domestic sales. This gave it just shy of 3 million deliveries in the U.S. for the full year, down 1.6% compared to 2017.
However, the pace of decline was far less severe than in the third quarter, when GM recorded an 11.1% plunge in its domestic vehicle deliveries. Furthermore, sales are stable or growing for most of GM's most important models, which points to the wisdom of the company's recent decision to pare down its model lineup.
The General closes the books on another solid year
GM delivered 785,229 vehicles in the U.S. last quarter, down 2.7% year over year. The mass-market Chevrolet brand and the upscale Cadillac brand both posted sales declines roughly in line with the corporate average. Buick was the main laggard, posting a double-digit decline in deliveries, while GMC bucked the overall trend with a 3.5% gain.
For the full year, Buick's domestic deliveries fell 5.6%, while the other three brands all posted declines of roughly 1%.
Lots of moving parts were involved in GM's sales performance last quarter, but the main driver of its sales decline was falling demand for traditional passenger cars. Combined deliveries of the Chevy Spark, Sonic, Cruze, Malibu, and Impala models plummeted by nearly 30,000 units compared to the fourth quarter of 2017, more than explaining the 21,510-unit decline in GM's total deliveries.
GM's car sales cratered in 2018. Image source: General Motors.
Here's what's working
While GM's domestic sales are declining, its crossovers and trucks are thriving. For the full year, crossover deliveries rose 7%, while pickup deliveries increased 3% -- even though GM was selling prior-generation Chevy Silverados and GMC Sierras for most of the year.
The GMC Terrain, Chevy Equinox, and Chevy Traverse models -- all completely redesigned for the 2018 model year -- logged particularly strong sales growth. These are GM's three top-selling crossovers, together accounting for 20% of its domestic deliveries last year.
The Equinox is the highest-volume model, with 332,618 deliveries in 2018, up 14.5% year over year. This allowed it to gain ground on Toyota Motor's (NYSE: TM) segment-leading RAV4, which achieved a 4.8% sales increase last year, with 427,170 deliveries in the U.S. Nearly half the Equinox's growth for the year came in the fourth quarter, when deliveries surged 26.4%.
Meanwhile, the GMC Terrain -- which is essentially a slightly upscale version of the Equinox -- posted a stellar 65% sales gain last quarter and a 33.8% increase for the full year. In fact, if the two siblings are considered together, deliveries reached 446,932 units in 2018, surpassing those of the Toyota RAV4.
Simplifying the model lineup makes sense
In late November, GM announced that it would drop six passenger car models from its U.S. vehicle lineup this year. The company's recent sales results show that this was the right decision.
For 2018 as a whole, cars represented just 23% of GM's domestic sales mix -- even though the company sells 15 different car models in the U.S., representing about 40% of its nameplates. By contrast, Toyota sold about 30% more passenger cars in the U.S. last year despite having fewer models. In fact, the Camry, Corolla, and Prius together outsold all 15 GM car models combined.
The situation is reversed for crossovers, SUVs, and trucks. The Toyota and Chevrolet brands both have nine nameplates across those categories -- depending on how you count, anyway -- but Chevy's domestic deliveries were 16% higher last year. The launch of the new Chevy Blazer crossover right at the end of the year could widen Chevrolet's lead in 2019.
The upshot is that GM has a competitive advantage in crossovers, SUVs, and trucks -- not cars. Its proliferation of car nameplates hasn't made it more successful in that part of the market. GM should be able to recapture the lost sales volume from paring down its car lineup pretty quickly, mainly by continuing to grow in the crossover market. In the long run, that's likely to be far more profitable than the status quo.
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