In the third quarter, General Motors (GM) reported $3.5 billion in revenue from its financial services arm, about 9.4% higher than its revenue of $3.2 billion in the third quarter of 2017. The company’s financial services arm’s third-quarter adjusted EBIT rose 66.7% YoY to $0.5 billion from $0.3 billion in the third quarter of 2017.
Many retail customers take advantage of vehicle financing services. As GM continues to focus on retail vehicle sales, investors can expect the positive trend in GM Financial’s revenue to continue in the coming quarters. GM Financial’s (or GMF) improved performance was mainly attributed to the company’s stable credit performance and portfolio growth. GMF’s retail penetration rose to 48% in the third quarter from 37% a year ago in the US market.
Contribution to GM’s business
Overall, GM Financial revenue accounted for 9.8% of GM’s total revenue in the third quarter as compared to 9.4% in the third quarter of 2017. Other large automakers (IYK) such as Toyota (TM), Ford (F), and Volkswagen (VLKAY) also provide finance options to their customers and dealers with their own financial services arms.
General Motors has a wide variety of vehicles in its product lineup, ranging from small cars to large trucks. The majority of its vehicles are targeted at common consumers unlike in the case of Ferrari (RACE), which targets only a niche of wealthy consumers. GMF make it easier for these consumers to afford a vehicle.
Read on to the next part where we’ll see how GM’s valuation multiples look after its third-quarter results.