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GM Competitive Advantage And Core Competencies

The GM Chevrolet Bolt EV. Source: Flickr Image.

According to General Motors (NYSE:GM)’s 2020 annual filing, the company was market share leader in North America and South America by the end of 2020 at 16.5% and 14.9% market share respectively.

For the Asia Pacific, the Middle East and Africa region, GM had about 8% market share which put the company at number 4 in terms of market share in the region.

For the Chinese market, GM achieved the number 2 market share in China at 11.6%.

The following chart summarizes GM’s global vehicle sales and market share in fiscal 2020.

General Motors' vehicle sales and market share in 2020

General Motors’ vehicle sales and market share in 2020

According to GM, the above vehicle sales and market share data represent: (1)retail sales (2)fleet sales and (3)vehicles used by dealers in their businesses. In addition, the vehicle sales data also includes all sales by joint ventures on a total vehicle basis and not based on GM’s percentage of ownership interest in the joint ventures.

As a result, these data do not correlate with the revenue recognized in any particular period in the income statements and they represent GM’s management good faith estimate based on sales reported by GM’s dealers, distributors, joint ventures and all other related parties.

For vehicle sales data that correlates with GM’s recognized revenue in the income statement, you can read about it here: GM wholesale vehicle deliveries.

While the above vehicle sales and market share data may not reflect the true nature of General Motors’ financial condition, they are still very much relevant and is an important indicator of GM’s brand power.

Nonetheless, GM achieved its prominent market share position by having the following several competitive advantages and core competencies.

Let’s take a look.

Vast Network of Dealerships

GM had an extremely vast network of dealers to market its vehicles and automotive parts worldwide. These outlets include distributors, dealers and authorized sales, services and parts outlets.

As of Dec 31, 2020, the company had a total of 12,358 authorized dealerships all over the world according to its 2020 annual report.

Of that amount, 4,697 were dealerships located in the North America region whereas 7,661 were located outside of North America under the GM International (GMI) business unit.

GM’s huge network of dealerships helps the company to sell, distribute and service its products around the clock. These dealerships are critical to GM’s success as they maintain the primary sales and service interface with the end customers.

To put it in perspective, Tesla had only about 561 retails and sales outlets as of fiscal 1Q 2021. The size of GM’s dealership is more than 30 times the size of Tesla’s.

In short, the vast number of dealerships gives GM an edge over its competitors in maintaining its market shares all around the world.

Huge Investment in Research and Development

General Motors' R&D spedning in 2020

General Motors’ R&D spedning in 2020

* R&D figures were obtained from GM’s financial statements.

GM spends a huge amount of money on research and development to develop the next generation products and services in addition to improving its existing products. Besides, the company has also been investing heavily in vehicles and greenhouse gas emission control, fuel economy improvement, and autonomous driving.

GM’s research and development expenses were $6.2 billion, $6.8 billion and $7.8 billion in the years ended Dec 31, 2020, 2019 and 2018. In terms of the ratio of R&D costs to GM’s total net sales and revenue, they were 5.1%, 5.0% and 5.3% respectively.

For comparison purpose, the research and development expenses for Tesla were $1.5 billion, $1.3 billion and $1.5 billion in the year ended Dec 31 2020, 2019 and 2018. The ratio of R&D expenses to Tesla’s total revenue were 4.7%, 5.5% and 6.8% respectively.

While the ratio of R&D costs to revenue may seem higher for Tesla, the absolute value of GM’s R&D spending was more than 4X greater than that of Tesla in 2020.

In short, GM invests billions in research and development, roughly 5% of its total revenue in 2020, to maintain its leading position in the automobile industry.

Battery Electric Vehicles Development

General Motors' Hummer EV

General Motors’ Hummer EV

* GM Hummer EV was obtained from GMC website (https://www.gmc.com/electric/hummer-ev).

In order not to be left behind in the electric vehicle race, GM is committed to an all-electric future and is investing heavily in multiple technologies offering increasing levels of vehicle electrification. This includes the recently enhanced Chevrolet Bolt EV which has about 259 miles of range with the 2020 model year.

Other than the Chevrolet Bold EV, GM has also announced recently, an all-new battery-electric architecture that will be launched on an upcoming Cadillac EV model.

Moreover, GM also has launched an EV version of the GMC Hummer since May 2020, an upcoming battery-electric truck, which will be built at the Detroit-Hamtramck Assembly that has already been re-tooled into a fully-dedicated electric vehicle facility.

With all the upcoming electric vehicles, the demand for battery cells will be huge in the future. Instead of sourcing battery cells from third parties, GM has planned to mass-produce battery cells on its own through collaboration with LG Chem Ltd on an equally owned joint venture.

Besides, GM has also unveiled an improved battery pack called Ultium which is intended to be flexible and multifaceted so that the battery cells can be stacked in any way the company wants it, whether horizontally or vertically.

In addition, GM has also developed the myChevrolet app which enables drivers to access the largest collective electric vehicle charging network in the U.S. This data of a vast network of charging infrastructure is a result of GM’s successful collaboration with several charging network operators which has given GM access to real-time data on their respective networks and charge station health.

All in all, GM’s seriousness in embracing an all-electric future in the automobile industry shows that the company is ready and has the capabilities to develop its own technologies in order to gain an upper hand in the all-electric space.

Leader in Autonomous Driving Technology

General Motors' Cruise Origin

General Motors’ Cruise Origin

* GM Cruise Origin was obtained from GM Cruise website (https://www.getcruise.com/technology).
* No steering wheel. No mirrors. No pedals. It’s an entirely new transportation experience designed purely around the rider, according to GM Cruise.

GM is actively developing its internal state-of-the-art autonomous driving technology. The company is not only investing in advanced self-driving technology but also significantly testing autonomous vehicles in several cities such as San Francisco, Scottsdale and Michigan.

As a result, the company has created the Super Cruise which is a driver assistance feature that enables hands-free driving on the highway. GM plans to roll out Super Cruise to all Cadillac models and other brands by 2021.

In addition to Super Cruise, GM also created the Cruise AV in January 2018. Cruise AV is a self-driving vehicle different from any others in that it was built from the start to operate safely on its own without any driver.

GM has designed the Cruise AV to be a production-intent vehicle which means that when the company’s self-driving technology is ready for deployment, these vehicles will be mass-produced in the most efficient and cost-effective ways.

Far from over, GM has also successfully invited Softbank Vision Fund to invest in GM Cruise in May 2018. GM Cruise is responsible for the development and commercialization of autonomous vehicle technology in the company.

In October 2018, both Honda and GM have agreed to work together to fund and develop a shared autonomous vehicle for GM Cruise. The purpose of this joint venture is to create a shared autonomous vehicle (SAV) that can be manufactured at a high volume.

Owner of a Car and Ride Sharing Platform

General Motors is the owner of Maven which is a car and ride-sharing mobile app that was created in January 2016. Maven consists of two services, namely Maven Gig and Maven Car Sharing.

Maven Gig allows members to lease vehicles to drive in any ride-sharing and delivery services (package, grocery and food) and the app works with companies such as Uber, Deliv and GrubHub. Members can choose from a wide variety of vehicles and can even choose the Chevrolet Bolt EV which includes a free charging service.

Maven Car Sharing is a mobile app for car sharing where users can rent a vehicle at an hourly or daily rate and at the same time lease out their GM vehicles for rental and earn money for doing it.

According to the 4Q19 annual report, Maven is available in 15 cities across the US, Canada and Australia. As of Dec 31 2018, Maven Gig and Maven Car Sharing have accumulated in aggregate over 171 million miles driven, 34 million all-electric miles driven and 247,000 reservations. Maven now has over 190,000 members.

Update: On April 21, 2020, GM announced plans to shut down Maven Gig and Maven Car Sharing.

Alternative Fuel Vehicles Technology

GM has a couple of alternative fuel vehicles technology such as the FlexFuel vehicles that can run on ethanol-gasoline blend fuels as well as technology that can support compressed natural gas and liquefied petroleum gas (LPG).

FlexFuel vehicles have already been rolled out in the US and Canada for the 2020 models to retail and fleet customers capable of operating on gasoline, E85 ethanol or any combination of the two.

In Brazil, most vehicles sold are FlexFuel vehicles capable of running on high ethanol blends.

Hydrogen Fuel Cell Technology

In addition to biodiesel blend fuel, GM is also working on developing hydrogen fuel cell technology. The company is working on a program called the Project Driveway that used the Chevrolet Equinox fuel cell electric vehicle for real-world driving and has accumulated more than 3 million miles of real-world driving.

GM is looking at all angles to identify a business opportunity for hydrogen fuel cell technology and not ruling out the possibility of working with the US Army and Navy.

The company also signed an agreement with Honda in 2016, leveraging on Honda expertise to jointly develop next-generation fuel cell systems and hydrogen storage technology, aiming for commercialization in 2020.

GM Cares for the Environment

While this feature may not be part of GM’s competitive advantage in the automobile industry, it’s good to know that GM cares for the environment in its quest to a leading market share position in the industry.

In line with the company’s ultimate goal of zero greenhouse gas emission, GM has committed to waste reduction and costs saving as part of its business strategy. To do this, GM is in the progress of converting as many of its worldwide operational facilities to landfill-free facilities.

As of Dec 31 2019, GM has successfully converted 58 (or 45%) of its manufacturing facilities and 36 (or 38%) of non-manufacturing facilities to landfill-free operation.

A landfill-free facility is dedicated to more than 90% of waste materials being composted, reused or recycled. In addition, approximately 5% of waste in waste-to-energy facilities is converted to energy.

In 2020 alone, GM has successfully diverted 1.0 million metric tons of waste from going into the landfill because of the implementation of these waste reduction operations.

As a result, approximately 4.6 million metric tons of greenhouse gas have been avoided from being released into the atmosphere in the company’s global operations.

Far from over, the company is targeting to meeting its electricity needs with renewable energy by 2050. As of Dec 31 2019, GM had implemented projects that had increased renewable energy usage to 400 megawatts, approximately 20% of its global electricity use.

Additionally, in 2020, GM executed its largest power purchase agreement to date, with 180 megawatts of solar electricity supplying its U.S. operations starting in 2023.

There are many more examples where GM has spent considerable efforts towards minimizing greenhouse gas emissions in its global business operations.

Conclusion

In short, GM is a leading automotive manufacturer which owns not only a vast network of dealerships but also several next-generation technologies such as all-battery electric vehicles, autonomous driving and alternative fuel cell vehicles.

The company has also spent a considerable amount of funds on research and development, totaling as much as $6.2 billion in fiscal 2020.

While busy making money, GM does not forget about caring for the environment with its active waste reduction strategy and commitment towards renewable energy usage.

All in all, GM has the necessary competitive advantages and core competencies to stay relevant in the automotive industry and win the EV race.

References and Credits

1. All financial figures in this page were obtained from GM quarterly and annual reports through its Investor Relation website: General Motor Investor Relations.

2. Featured images in this article are used under creative commons license and sourced from the following websites: MomentiMedia TechFever Network and Steve Rainwater.

Disclosure

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