Why have General Motors (NYSE:GM)’s sales not decreased?

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By Stefan Larson on October 20, 2014 Automobile

General Motors (NYSE:GM) has to recall about 26 million vehicles due to some fatal flaws in the cars. The recall record of the entire automotive industry of the U.S. was 30.8 million, which was set in 2004. General Motors (NYSE:GM) broke this record within six months. It will be fair to say that the company has had it tough throughout the current fiscal. The company has had all this negative attention in the social and real media. You won’t be surprised to hear that many of its customers are switching to other automakers. But the thing is this didn’t happen. A look at the company’s financial conditions reveals the reality.

General Motors (NYSE:GM) sold about 2.5 million cars across the world in this year’s third quarter. This is, in fact, the company’s best performance in the third-quarter, since the year 1980. Surprise! So this is the year when the company manages to break two records: one, for the largest number of recalls in the industry and two, for the best performance in third-quarter. The most important question now is: Why?

Let’s look at the reasons why the company’s sales grew in this quarter:

The company has two large markets – U.S. and China. Both the markets are growing at a very healthy rate and so, are helping in increasing the sales of the company. In the U.S., the year-to-date sales increased by 4%, while those in China increased by 12%. This is reason number one.

Now, reason number two: General Motors (NYSE:GM) had a difficult time after the year it went bankrupt. The company was unable to invest money in new vehicles and so, consequently, produced cars with very old designs and shapes. They struggled and struggled and finally, introduced a new fleet of autos in 2013. 18 new vehicles were dispatched in the U.S. market only. This increased the company’s traffic as well as sales. General Motors (NYSE:GM) is planning to release 15 new models in the United States in 2014. The fresh cars continue to be sent out into the market. The company is expecting its new vehicles to constitute 27% of the sales worldwide. By the fiscal 2016, the percentage will have increased to 38% and 47% in 2019.

The third reason is the recalls. As the troubled customers visit the company with complains about their old cars, the company introduces them to incentives and better, newer vehicles. This strategy has attracted a lot of customers. The models that were recalled are no longer being manufactured so people are willing to give the company another chance.

An analyst believes that first news of recalls was uncommon. Now, you hear them every day. So, for the customers, the recalls are not a big deal and this does not affect their decision in purchasing vehicles from General Motors (NYSE:GM) again.

All in all, contrary to expectations, the sales of General Motors (NYSE:GM) have not reduced despite the massive recalls and the negative press. The company is only going up.