GM's quarterly sales drop 1.5%, inventory at its highest since 2020

By Claudia Assis

GM's new-car prices to remain under pressure, and incentives will continue to rise, analyst says

General Motors Co. said Tuesday that its first-quarter U.S. sales dropped 1.5% year over year to 594,233 vehicles, due to lower fleet sales, and inventories continued to rise.

GM (GM) is "on plan," Marissa West, president of GM North America, said in a statement. It gained market share with inventories "in good shape heading into the spring, and production and deliveries of Ultium platform EVs are rising, led by the Cadillac Lyriq."

GM's first-quarter sales numbers were a tad lower than Cox Automotive's forecast of 594,442 GM vehicles sold in the period.

Earlier Tuesday, Tesla Inc. (TSLA) reported first-quarter sales vastly lower than Wall Street's expectations, underscoring concern about demand for EVs in the U.S. Rivian Automotive Inc. (RIVN) also reported first-quarter sales.

At GM, EVs "acted as a drag on overall volumes," declining by 20.5% year-on-year, CFRA analyst Garrett Nelson said in a note Tuesday.

GM dealership inventories were at their highest since 2020, reaching 534,479 vehicles at the end of March, up 17% from late 2023, he said.

"With inventories rising rapidly, we expect new vehicle prices to remain under pressure and incentives to continue increasing," Nelson said.

GM's first-quarter earnings will reflect the company's first full quarter of "significantly higher labor costs since the new UAW deal was reached in November," he said.

The car maker is expected to report quarterly earnings by the end of the month. Analysts polled by FactSet expect GM to report adjusted earnings of $2.02 a share on sales of $40.2 billion. That would compare with adjusted EPS of $1.91 on sales of $40 billion in the first quarter of 2023.

Nelson kept his hold rating on GM's stock. Shares "have appreciated materially since November and near-term comps remain difficult," he said. The analyst lifted his price target on the stock to $44, from $38, which represents a 2% downside over Tuesday's closing.

GM shares have gained 25% so far this year, compared with an advance of around 10% for the S&P 500 index SPX. That outperformance doesn't hold on a 12-month basis, with GM stock up 22% compared with a 27% gain for the broader index.

-Claudia Assis

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04-02-24 1750ET

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