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What Was Worrisome about GM’s US Market Share in 2016?

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Feb. 13 2017, Updated 7:36 a.m. ET

GM’s market share

General Motors (GM) has the largest market share in the US auto market ahead of Ford Motor (F), Toyota (TM), and Fiat Chrysler (FCAU). Last year, the company stood at the third position in the list of the largest global automakers by vehicle volume in the world.

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US market share fell in 2016

According to General Motors’ estimates from its 4Q16 earnings report, it managed to keep its US market share at 17.0%, down from 17.3% a year ago.

Notably, for the last few years, General Motors has been cutting its fleet sales to rental car companies in order to boost its margins. It wanted to utilize its plant capacity to manufacture more profitable vehicles for retail customers. The profitability from fleet sales tends to be lower than the profitability from retail vehicle sales. While this strategy of cutting fleet sales had a positive impact on GM’s profitability, it took a toll on its margins.

Primary concerns

As noted earlier in this series, trucks and crossovers tend to yield higher margins than smaller cars for automakers. In 2016, GM’s US market share in the truck segment dropped to 24.2% from 24.6% a year ago. Similarly, the company reported the US crossover segment market share of 15.0% last year, down from 16.9% in the previous year.

GM generated the majority of its revenues from the US market. In the last couple of years, small car sales have underperformed the sales of trucks and crossovers in the country. Therefore, in such a scenario, a drop in the US truck and crossover segment market share could be worrisome.

Note that other mainstream automakers (XLY) including Ford (F), Toyota (TM), and Fiat Chrysler (FCAU) also generate a significant portion of their revenues from the US market.

Next, we’ll take a look at GM Financial’s 4Q16 performance.

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