General Motors Company (NYSE:GM) has reported that it made more profit in Canada due to higher sales in February while sales in the US dropped by 1.5% in the same month.
The company had good sales performance in February amid expectations by analysts that the demand will be lower compared to 2015. This is because the company had a boom in demand for trucks and light vehicles last year. Last year, dealers selling GM brands including Cadillac, Chevrolet, GMC and Buick sold 15,729 vehicles in February 2016 thus registering a 14% increase compared to the sales made in February 2015.
GM’s vice president for the Canadian division John Roth stated that the brands have had strong performance in January and February on account of the momentum gained from the strong sales last year. The automotive giant also revealed that its sales to car rental companies went down by 39% as sales dropped by 16,500 units. Reports indicate that the company is preparing to exit such sales because they yield lower profits compared to sales from other markets.
The shift means General Motors will sell fewer vehicles to fleet customers such as rental firms. The numbers will drop to 20% in 2016 compared to sales in the past years which averaged between 22% and 24%. Kurt McNeil, the vice president for the company’s sales operations in the US, described GM’s strategy as simple because it targets more profitable retail share while upholding incentive spending and inventory levels. He also added that it will also work on delivering fewer rental vehicles.
GM failed to live up to expectations set by analysts from Edmunds.com. The analysts targets were 4.1% sales growth from Edmunds.com and 8% from Kelley Blue Book. Some of the analysts claim that the move was unexpected, and the firm’s shares fell by 1.3% to $29.06. Despite the drop in rental cars sales, the company still managed to invest heavily on discounts in February. The company claims that its discounts were 12.4% of the prices compared to 11.1% industry average.