It is also significant that the company is building a Cadillac plant in China with a production capacity of 150,000 units. Despite its solid sales General Motors Company (NYSE:GM) has not made a lot of money in China as its popular small cars and minivans are low on margins. Moreover the profits get split with the joint venture partners. So the company has been trying to get into the luxury car segment where margins are high and there is good money left even after paying the joint venture partners.
Key Challengers
It goes without saying that General Motors Company (NYSE:GM) is planning to take the world by storm introducing new models and dominate its key markets. It’s time to take a look at the competitive pressures that the company will be feeling.
GM’s cross-town rival Ford Motor Company (NYSE:F) is also on a tremendous growth trajectory. It is outperforming in the key US market. The company grew its sales by 13% in the first four months of the year compared to GM’s 10% and Chrysler’s 8.5%. Ford is enjoying excellent demand for its cars and running its plants at almost 114% capacity.
However, in Europe Ford Motor Company (NYSE:F) lags General Motors Company (NYSE:GM) in restructuring. It posted a loss of $462 million in the first quarter. Like GM it is also trying to get back in the black by mid-decade. In China Ford has a much smaller presence than GM. According to LMC Automotive, GM has around 15.6% market share while Ford Motor Company (NYSE:F) has 3%. The latter is planning to increase its presence in China and garner 6% market share by 2015.
Meanwhile, General Motors Company (NYSE:GM)’s Japanese rival Toyota Motor Corporation (ADR) (NYSE:TM) is growing its earnings solidly riding on the Japanese government’s currency devaluation strategy. In fiscal 2013 the company earned around $10.22 billion on revenue of $234.33 billion.
However, things are not going too well for Toyota Motor Corporation (ADR) (NYSE:TM) in the US and China. In the US it is suffering from falling demand of its core vehicles like Camry and Prius. In April sales were lower by 1.1% y-o-y. In China April sales were down by an even higher margin of 6.5% y-o-y. Demand is suffering on account of political territorial disputes between China and Japan which has led to people boycotting Japanese products including automobiles.
Last word
Things are looking brighter for GM. It has just turned in its thirteenth consecutive profitable quarter. The company is gaining grounds in key US and China markets and approaching breakeven in Europe. There is a lot of anticipation among in the industry over the upcoming launches. All this make a solid bullish case for General Motors Company (NYSE:GM).
Gaurav Basu has no position in any stocks mentioned. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford Motor Company (NYSE:F).
The article Why Should You Be Bullish on GM? originally appeared on Fool.com.
Gaurav is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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