Morningstar | GM's 3Q Sales Show Disciplined Incentive Spending Amid a Tough Comparable From Harvey
Automakers reported September U.S. light-vehicle sales that faced a difficult year-over-year comparable due to September 2017's large boost from replacement demand after Hurricane Harvey in Houston and from one less selling day in September 2018. Total sales for this September, excluding Audi, which has not reported yet, came in at 1.42 million, down 5.6% year over year. We calculate that on a constant selling days basis, sales declined by 1.8%. We expect the vast majority of the hurricane comparable problem to be in September 2018, but we expect October will also see some negative impact year over year. Despite large negative variances in headlines, we do not think the industry is in a bad position. Sales, though declining, are still healthy, and automakers are enjoying Americans' continued mix shift to light trucks over sedans. The former are nearly 70% of U.S. light-vehicle sales each month, and GM's and Ford's own mix is about 80%.GM only reports quarterly sales, and its volume fell 11.1% in third-quarter 2018 versus third-quarter 2017. We calculate an 8.7% decline after adjusting for two extra selling days in the prior year's quarter. GM put the third-quarter 2018 seasonally adjusted annual rate at 16.9 million compared with 17.2 million in third-quarter 2017. GM kept its average transaction prices growing in the quarter, up $700 year over year to a third-quarter record of $35,974. Mix moving to light trucks and fairly new crossover products helped ATP growth despite industry demand slowing from recent years. GM's third-quarter incentive spending as a percentage of ATP came in at 12%, slightly below the industry's 12.1%, according to J.D. Power data cited by GM. We'd prefer the industry's ratio be below 10%, but we think that is not going to happen soon given we are late in the economic cycle. Still, we are glad to see GM's ratio down considerably from 13.6% in the first half of 2018 and down 160 basis points versus third-quarter 2017.
General Motors designs, builds and sells trucks, crossovers, cars and automobile parts. The company also provides automotive financing services through its subsidiary, General Motors Financial Company, Inc. (GM Financial). GM Financial provides retail loan and lease lending across the credit spectrum. GM Financial provides commercial lending products to dealers including new and used vehicle inventory floorplan financing and dealer loans, which are loans to finance improvements to dealership facilities, to provide working capital, and to purchase and/or finance dealership real estate. Other commercial lending products include financing for parts and accessories, dealer fleets and storage centers.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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