Factors Underlying GM's Revenue Growth in North America


GM ( GM ) reported a 15% year-on-year increase in total revenues for Q1 2011. GM's North America (NA) operations is the largest contributor to its total revenues, accounting for almost 60% in Q1. In this article we take a look at major trends that emerged in the past quarter that affect revenue generation in North America. GM competes with other global automakers like Ford ( F ), Daimler AG (NYSE:DAI), Honda (NYSE:HMC), Toyota (NYSE:TM), Hyundai (SEO:005380) and Nissan ( NSANY ).

We currently have a price estimate of $34.95 for General Motors's stock , implying upside to market price. We estimate that GM's North American automotive division (cars and trucks together) contributes about 31% of its stock value.

Vehicle Sales Benefit from Successful Product Launches and Economic Improvement

Revenues from increased wholesale vehicle sales (up $2.7 billion) contributed to the bulk of increased revenue generation in North America. An improving economic climate, higher consumer confidence and recent vehicle launches helped GM's retail vehicle sales in NA in Q1 grow by 21% year-on-year.

GM's product-engineering and marketing focus on its four core brands - Chevrolet, Cadillac, Buick and GMC helped drive demand for products such as Chevrolet Cruze, GMC Terrain, Buick LaCrosse and Cadillac SRX. Sales promotions as well as leases and loans offered through GM Financial also contributed to this increase. New GM vehicles accounted for almost 40% of leases and loans offered by GM Financial in Q1 2011, a number we expect to increase over our forecast horizon.

Other Trends

Due to greater vehicle sales volumes, GM recorded increased revenues of around $0.2 billion from services such as OnStar, Customer Care and after-sales. This was offset by increased sales allowances ($0.3 billion increase) to drive vehicle sales.

You can drag the trend lines in the  modifiable charts above to see the impact of these trends on GM's stock value.

See our complete analysis of GM stock here

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: F , GM , NSANY



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