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Stock Analyst Update

GM's Q2 Sales Have Bright Spots Despite Low Inventory

We expect gradual inventory improvement throughout the year.

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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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