Why investors should pay attention to GM’s market share
GM’s global market share
The chart below is from the first quarter 2013 earnings call slide deck. GM is in each of the top regions and has double-digit market shares in the top five markets, except for Japan and Germany. In the case of Japan, no foreign manufacturer has significant market share. In Germany, home of Volkswagen (VOW), BMW (BMW), and Daimler (DAI), GM has a 7.2% market share in the first quarter of 2014. Importantly, GM picked up share in Europe with the introduction of two new Opel vehicles. In China, GM picked up a tenth of a percent, to 15.2% of this large higher-growth market. In Brazil, GM lost two-tenths of a point.
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The purchase decision among automobile products includes several factors, like styling, utility, seat count, fuel economy, reputation, safety, dealer reputation, depreciation, total cost to operate, and engine performance. It’s a complex purchasing decision driven by the ability to purchase and then the above factors to determine which product the consumer finally decides on purchasing. A competitive company has to have the products the consumer wants. The market is constantly changing, with new technologies and styles driving new products.
Market share and operating leverage
Here’s where market share matters: operating leverage. In 2013, GM spent $7.5 billion on capital expenditures. It maintains 40 manufacturing facilities in the U.S. and manufacturing facilities in 24 other countries. If you go from one to two shifts at a plant, you double volume yet only have to pay labor and parts, thereby improving manufacturing profitability. The same concept applies to research and development (R&D). GM spent $7.2 billion on R&D in 2013 developing technologies for future products. If GM develops a differentiating technology, GM could put it on over 9 million vehicles, leveraging its technology investments. This should provide GM higher margins.