Lower Gas Prices Fuel Sales Surge of GM's Big SUVs, Trucks in 1st Quarter

Lower gas prices have fueled a buying spree this year of SUVs and trucks among consumers who had opted for more fuel-efficient vehicles after the Great Recession. But those days are in the past as General Motors reported sound profits in the first quarter.
The shift to pickups and SUVs pushed GM to a $2.18 billion first-quarter profit in North America. More challenging markets in Europe, Russia and South America reduced GM’s overall quarterly net profit down to $945 million.

“Key vehicles like our recently launched full and mid-size trucks, and our cost discipline helped us deliver a solid quarter,” said Chuck Stevens, GM executive vice president and chief financial officer. “We continue to take decisive actions to address issues head-on and to drive the company to generate strong results.”
In the aftermath of the 2007-2008 financial crisis, big SUVs such as the Chevrolet Tahoe saw big slumps in sales as consumers were saddled with prices well above $3 at the gas pump and the U.S. economy was mired in a tough and slow recovery.
But the U.S. economy is stronger, with a more robust jobs market and higher home prices. Gas has averaged about $2.30 per gallon in 2015. In the first quarter, consumers bought nearly 55,000 big SUVs from GM, the best January-through-March sales total in seven years.
Pickup sales also jumped as conditions improved for small businesses. GM sold more than 198,000 pickups in the U.S., the best first quarter for the vehicles in eight years, according to Ward’s Automotive.
Big SUV=Big Profit
The bigger the vehicle, the larger the profit. For the first quarter, the average price of a Tahoe increased 8 percent to more than $57,000, said Kelley Blue Book.
Other truck-based SUVs saw similar or even bigger price increases. Analysts estimate that GM earns a profit of about $10,000 apiece on trucks such as the Chevrolet Silverado and Cadillac Escalade.
“With gas prices still near a seven-year low point, and with credit more affordable and available than ever, GM, like the rest of the industry, has seen a significant increase in sales of their most profitable vehicles,” Kelley Blue Book Senior Analyst Alec Gutierrez told the Associated Press.
GM sold 2.4 million vehicles globally in the first quarter of 2015, up 2 percent compared to a year ago. Sales in China increased 9 percent and deliveries in North America were up 6 percent.

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