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GM Competitive Advantage And Market Share

The GM Chevrolet Bolt EV. Source: Flickr Image.

According to the Q4 2019 annual filing, General Motors (NYSE:GM) estimated that the company was market share leader in each of North America and South America by the end of 2019 at 15.9% and 15.5% market share respectively.

For Asia Pacific, Middle East and Africa region, GM had about 7.8% market share which put the company at number 4 in terms of market share in the region. For the Chinese market, GM achieved number 2 market share in China at 12.2%.

The following chart summarizes GM’s vehicles sales and market share in 2019.

gm 2019 vehicle sales and market share

GM vehicle sales and market share in 2018

According to GM, the above vehicle sales and market share data represents: (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 picture of General Motors’ business 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:

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 2019, the company had a total of 12,650 authorized dealerships all over the world according to its 2019 annual report. Of that amount, 4,743 were dealerships located in the North America region whereas 7,907 were located outside of North America under the GM International (GMI) business unit.

The number represents a huge network of dealerships selling, distributing and servicing GM’s 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 a little over 400 of retails and sales outlets as of Dec 2019. 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

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

GM’s research and development expenses were $6.8 billion, $7.8 billion and $7.3 billion in the years ended Dec 31, 2019, 2018 and 2017. In terms of the ratio of R&D costs to GM’s total net sales and revenue, they were 5.0%, 5.3% and 5.0% respectively.

For comparison purpose, the research and development expenses for Tesla were $1.3 billion, $1.5 billion and $1.4 billion in the year ended Dec 31 2019, 2018 and 2017. The ratio of R&D expenses to Tesla’s total revenue were 5.5%, 6.8% and 11.7% respectively.

While the ratio of R&D costs to revenue seems higher for Tesla, in fact only 0.5% higher as of 2019, the absolute value of GM’s R&D spending was more than 5 times greater than that of Tesla in 2019.

In short, GM’s huge investment in research and development, roughly 5% its total revenue in 2019, gives the company a huge boost in terms of competitive advantage in the automobile industry.

Battery Electric Vehicles Development

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 in its 4Q 2019 annual report, an all-new battery electric architecture that will be launched on an upcoming Cadillac EV model. Moreover, GM also confirmed the launch of GMC Hummer EV in May 2020, an upcoming battery electric truck, which will be built at the Detroit-Hamtramck Assembly which is currently being 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 join 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 anyway 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

GM is actively developing its internal state-of-the-art autonomous driving technology. The company is not only investing in advance 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 vehicles 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 join venture is to create a shared autonomous vehicle (SAV) that can be manufactured at 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 free charging service.

Maven Car Sharing is a mobile app for car sharing where users can rent a vehicle by 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.

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 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 have accumulated with more than 3 million miles of real-world driving.

GM is looking at all angles to identify 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 system 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 green house gas emission, GM has committed to waste reduction and costs saving as part of its business strategy. To do this, GM is in 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 are converted to energy.

In 2019 alone, GM has successfully diverted 1.2 million metric tons of waste from going into the landfill because of the implementation of these waste reduction operations. As a result, approximately 5.6 million metric tons of green houses gas has been avoided from being released into the atmosphere in the company 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.

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

Conclusion

In short, GM is a leading automotive manufacturer which owns not only a vast network of dealership but also several next-generation technology such as all-battery electric vehicles, autonomous driving and alternative fuel cell vehicles. The company has spent a considerable amount of funds in research and development, totaling as much as $6.8 billion in 2019.

In addition, the company also owns one of the fastest growing car and ride sharing mobile app to compliment its automotive business. While busy making money, the company does not forget about caring for the environment with its active waste reduction strategy and commitment towards renewable energy usage.

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.

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