GM China Sales Fall in Q1 as Overall Market Rises

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Now that General Motors Co. (NYSE: GM) has agreed to sell its Opel Group to Peugeot, the U.S. company will compete in just two major markets — the United States and China. In 2016, GM sold 3.63 million vehicles in the United States and 3.91 million in China. The company’s U.S. market share dipped from 17.3% in 2015 to 17.0% in 2016, and in China from 14.9% in 2015 to 13.8% in 2016.

That’s why GM’s report on its March sales in China, touting its best March sales ever, rings a bit hollow. March sales of 345,448 units were 16% higher than March 2016 sales, but first quarter sales dropped 5.2%.

Partly the quarterly decline was due to the timing of the Lunar New Year holiday. More important, perhaps, was the expiration in December of the government’s tax cut on purchases of vehicles with engine sizes smaller than 1.6-liters. The end of the tax cut likely pulled many sales forward from the first quarter.

GM’s January sales in China declined 24% and February sales rose by just 0.4%. Even the March increase was not enough to overcome the accumulated decline over the first two months of the quarter.

The first-quarter sales totals indicate the extent to which GM’s decision to pull out of Europe to focus on China and the United States is a big gamble with the company’s future. GM’s worldwide sales in 2016 totaled just over 10 million units, of which 1.21 million came in Europe. U.S. sales probably reached a peak last year at 17.5 million units and IHS Markit has forecast U.S. sales of 17.4 million units for 2017.

Vehicle sales in China are forecast to rise nearly 2% in 2017 to 28 million units and GM cannot afford to see its share of those sales fall now that the European market is being closed down.