Revenue growth is one of the factors to consider when buying a stock. It’s no exception for General Motors (NYSE:GM).
Moreover, revenue or sales growth has increasingly become more important for GM when the company pushes for electrification and aims to become one of the prominent players in the EV market.
When we look at GM’s revenue or sales, the figures have been sort of muted and even declined.
Post-COVID age, GM is making a comeback by betting on its electrification strategy.
Can GM succeed? Probably.
In this article, we will explore a couple of GM’s revenue metrics which include the annual and quarterly revenue as well as the projected sales in 2021 and 2022.
Additionally, we break down GM’s revenue by business segments and by regions to find out how each revenue segment and region performs in terms of growth rates, margins and profitability.
Keep in mind that the following revenue and profitability discussions are based on the GAAP standard that GM disclosed in its financial statements.
Let’s get started!
GM’s Revenue Breakdown
The following snapshot shows GM’s revenue breakdown by segment.
As shown in the above snapshot, General Motors’ net sales and revenue comes primarily from 2 core segments:
- 1. Automotive
- 2. GM Financial
In general, GM’s segments consist primarily of Automotive and GM Financial.
The automotive sector is GM’s core business in which the design, manufacturing and distribution of automobile products are done.
Other than the automobile sector, GM is also involved in financial services such as providing loans to customers and offering credit facilities to retailers.
GM’s automotive sector consists primarily of GM North America (GMNA), GM International (GMI) and GM Corporate as shown in the above snapshot.
According to General Motors, GM International primarily meets the demands of customers outside North American with vehicles developed, manufactured and/or marketed under the Buick, Cadillac, Chevrolet, GMC and Holden brands.
The international operations also include GM’s presence in China with vehicles developed and marketed under the Baojun, Buick, Cadillac, Chevrolet and Wuling brands.
GM Corporate also falls under the automotive segment but its revenue contribution has been negligible. As a result, I have excluded the revenue from GM Corporate in some of the charts below.
From the above snapshot, GM’s automotive revenue is derived primarily from sales of new vehicles, parts and accessories.
Besides, sales of used vehicles and services are also part of GM’s automotive revenue.
Revenue from China
GM does not derive any revenue from the automotive business in China.
Instead, GM recognizes the revenue from China through Equity Income in the income statements.
The reason is that GM does not own more than 50% of the equity in all the joint ventures in China.
From an accounting perspective, GM treated the automotive China joint ventures as associates rather than subsidiaries.
Here is a quote extracted from the company’s financial report regarding non-consolidated affiliates (China Joint Ventures):
“Nonconsolidated affiliates are entities in which an equity ownership interest is maintained and for which the equity method of accounting is used due to our ability to exert significant influence over decisions relating to their operating and financial affairs.
Revenue and expenses of our joint ventures are not consolidated into our financial statements; rather, our proportionate share of the earnings of each joint venture is reflected as Equity income.”
To find out the number of vehicle deliveries as well as the equity income from China, you can visit this webpage: GM’s revenue streams from China.
GM Financial is one of GM’s major business segments.
The primary role of GM Financial is to provide financing services which include loans, financial assistance, credit facilities, etc. to not only retail customers but also dealers.
As pointed in GM’s revenue disaggregations snapshot above, GM Financial’s revenue is mainly made up of leased vehicle income, retail finance charge income and commercial finance charge income.
GM’s Net Sales and Revenue (Yearly)
Let’s first look at GM’s total net sales & revenue by year for the period from fiscal 2015 to 2021.
Between 2015 and 2021, GM’s annual revenue has been on a decline, with net sales reaching only $122.5 billion in FY2020.
Year over year, GM’s annual revenue had declined by more than 10% in fiscal 2020 compared to the prior year.
While GM’s revenue hit the lowest at only $122 billion in fiscal 2020, it is projected to rise slightly to $128 billion USD by 2021, a 5% higher compared to that of fiscal 2020.
By fiscal 2022, GM’s annual revenue is estimated to reach as much as $152 billion, driven primarily by the company’s electrification push.
Year to date in 2021, GM’s revenue has already clocked $93 billion and the targeted $128 billion of sales by the end of the fiscal year will be within the reach of the company if it can achieve the same revenue figure as that of 2020 for the 4th quarter.
General Motors vs Ford Motors vs Tesla
To get an idea of how GM’s total revenues look compared to its competitors, the chart above shows the comparison among GM, Ford and Tesla.
On a yearly basis, GM reported about the same level of revenue as that of Ford between FY2015 and FY2020.
However, GM’s revenues are much higher than that of Tesla, at nearly 4X higher in FY2020.
Going forward, GM’s growing revenue will be comparable with that of Ford and will be more than twice higher than that of Tesla by fiscal 2022.
One notable trend worth mentioning is that both GM and Ford’s annual net sales are expected to turn around starting in fiscal 2021, with 2020 figures being the lowest.
In contrast, Tesla’s revenue has been on an increase and reached a record high in FY2020 and is projected to reach $70 billion by fiscal 2022.
GM’s Net Sales & Revenue By Segment (Yearly)
From a segment perspective, GM’s automotive revenues are much higher than that of GM Financial, at roughly 8X higher in FY2020.
However, GM’s automotive revenues have been on a decline over the last 6 years whereas GM Financial’s revenue has been on a rise.
As of FY2020, GM’s automotive revenue reached $108.7 billion compared to only $13.8 billion for GM Financial.
GM Financial’s revenue had slightly declined by 5% in FY2020 from the prior year.
GM’s Net Sales & Revenue By Region (Yearly)
There are only 2 regions as reported by GM and they are GM North America (GMNA) and GM International (GMI).
Between FY2015 and FY2020, GMNA has been GM’s largest revenue contributor, at more than $100 billion on a yearly basis.
However, that figure has dropped to only $96.7 billion as of FY2020.
A similar trend is observed for GMI where its annual revenue has been on a decline.
As of FY2020, GMI’s net sales and revenue totaled only $11.6 billion, down nearly 30% from FY2019.
In short, GMNA’s net sales and revenue were more than 8X higher than that of GMI in FY2020.
GM’s Net Sales and Revenue (Quarterly)
As shown, GM’s quarterly net sales & revenue may have already topped out in FY2016 and have since been on a decline.
As of 3Q 2021, GM’s quarterly net sales and revenue clocked $27 billion USD, representing a year-over-year decline of more than 20%.
While GM’s quarterly revenues have recovered post-COVID age in 2021 and have been in much better shape than that in 2020, they are still down significantly compared to their historical highs.
Even during fiscal 4Q 2021 and 1Q 2022 when quarterly revenues are projected to go higher compared to 2020, they will still be flat on a long-term basis.
Nevertheless, GM’s quarterly net sales and revenues have recovered significantly in fiscal 2021 and are nearly at the same levels as that of pre-COVID periods.
GM’s Net Sales and Revenue (TTM)
The TTM (trailing 12-month) plot is best used to show the long-term trend of GM’s net sales and revenue.
From a TTM perspective, GM’s net sales and revenue have actually declined as shown in the chart above and have remained flat since fiscal 2020.
As of 3Q 2021, GM’s net sales and revenue reached as much as $132 billion on a TTM basis, representing a year-on-year growth rate of 13%.
Going into fiscal 4Q 2021 and 1Q 2022, GM’s TTM net sales and revenues are projected to reach $127 billion and $131 billion, respectively, which are slightly above the figures reported in fiscal 2020.
GM’s Net Sales & Revenue By Segment (TTM)
As mentioned, GM’s automotive is the aggregate of all sales and revenues from GM North America, GM International, GM Europe and GM Corporate.
On the other hand, GM Financial is the captive finance arm of the company, whose primary roles are to provide retail and commercial lending products to retail customers as well as dealerships.
On a TTM basis, GM’s automotive revenue reached $117 billion as of 3Q 2021, constituting around 90% of total sales.
On a long-term basis, GM’s automotive revenue has been on a decline and may have hit the bottom in fiscal 2020.
Going into fiscal 2021, GM’s automotive revenue is seen recovering and hit a new high as of 3Q 2021 since fiscal 2020.
In contrast, GM Financial’s revenue has been quite steady and has remained at $14 billion USD for many fiscal years.
Despite experiencing multiple COVID restrictions, GM Financial’s revenue remained stable and has even grown slightly since fiscal 2020.
As of 2021 3Q, GM Financial’s revenue clocked at $13.6 billion USD on a TTM basis, representing a year-on-year decline of 3%.
On a side note, GM’s automotive revenue has been changing quite dramatically, illustrating the cyclicality and unpredictable nature of the company’s automotive business segment.
In contrast, GM Financial’s revenue seems to be more stable and does not change as significantly as its automotive counterpart.
In fact, GM Financial’s revenue has actually increased over the course of the 6-year period, albeit rather slowly.
This behavior is sort of expected as financial products do not rely heavily on consumers’ preference and market cyclicality.
GM’s Net Sales & Revenue By Region (TTM)
The chart above shows the further breakdown of GM’s automotive revenue into geographical regions such as GM North America (GMNA), GM International (GMI) and GM Europe (GME).
Without a doubt, GMNA has been the largest revenue contributor over the last 6 years, making up close to 80% of automotive revenue on average.
The 2nd spot goes to GMI at roughly 14% of automotive revenue on average.
The revenue from GME has ceased to exist after 2017 when the subsidiary was sold off in the same year.
On a TTM basis, GMNA’s revenue reached $105 billion USD in fiscal 2021 Q3 while GMI clocked nearly $13 billion USD in the same quarter.
GMNA has rebounded significantly in fiscal 2021 and is nearly at the same level as that reported in the pre-COVID period.
On the other hand, GMI’s revenue has been going downhill and is way off from its historical highs reported back in fiscal 2016.
GM’s Net Sales & Revenue Quarterly Growth Rates
As of 2021 Q3, GM’s net sales and revenue declined more than 20% on a sequential basis.
GM Revenue Year Over Year (YoY) Growth Rate
As of 2021 Q3, GM’s net sales and revenue declined 25% on a year-on-year basis.
GM’s Operating Income (TTM)
With all the net sales and revenues that GM has been reporting, how do they translate to profitability?
To get a glimpse of what GM’s profitability is like, we look at the company’s operating income which is shown in the chart above.
Operating profit or income is the profit measured after all costs and expenses of running the business, including costs of sales, research and development as well as SGA expenses, are deducted.
As such, operating income focuses on the strength of GM’s core business by excluding all non-core-related expenses.
In General Motors’ case, its core businesses are in the automotive and financial services.
According to the chart, GM’s operating income has rebounded quite significantly post-COVID age.
For example, GM’s operating income reached multiple new highs in fiscal 2021 on a TTM basis.
As of 3Q 2021, GM’s consolidated operating income came in at $11 billion USD, one of the highest the company has ever seen since fiscal 2020.
GM’s Operating Margin (TTM)
The operating income alone may not tell us the whole picture.
In this aspect, we will look at GM’s operating margin to find out the ratio of revenue that is converted into operating profit.
In other words, GM’s operating margin measures how much of that revenue is squeezed into profitability, after accounting for expenses such as costs of sales, R&D and SGA.
Keep in mind that the operating margin still leaves out other expenses such as interest costs and taxes.
That said, according to the chart, GM’s TTM operating margin has been on a decline and reached a low point of only 1% in 2Q 2020 before recovering to 8% in 3Q 2021.
In this aspect, GM’s operating margin is on a V-shaped trajectory, with the latest quarter having one of the best operating margins the company has ever seen.
GM’s Operating Income by Segment (TTM)
GM’s automotive operating income and GM Financial’s operating income have both recovered significantly in fiscal 2021 as seen in the chart above.
As of 3Q 2021, GM’s automotive operating income clocked at nearly $6 billion on a TTM basis which was more than twice the figure reported in the same quarter a year ago.
Moreover, GM’s automotive operating income in fiscal 2021 is at the same level as those reported in the pre-COVID period, indicating that the firm has not only fully recovered but also exceeded that of the pre-COVID results.
Similarly, GM Financial’s operating income has been on a tear since fiscal 2020, reaching multiple new highs in fiscal 2021.
As of 3Q 2021, GM Financial’s operating income clocked at $5 billion, a 100% higher on a year-on-year basis.
On a side note, you may notice that GM Financial’s operating income is comparable with that of the automotive sector despite having a revenue ratio of less than 10%.
This scenario says that GM Financial is a highly profitable business and makes as much money as its automotive counterpart.
GM’s Operating Margin by Segment (TTM)
GM Financial’s operating margin reaches 35% as of fiscal Q3 2021 on a TTM basis, a record high for this business segment.
On the other hand, GM’s automotive sector only managed to achieve an operating margin of 5% in the same quarter.
The vast contrast in operating margin between the 2 sectors shows that GM Financial is a highly profitable business while the automotive sector is a low-margin business.
In short, GM Financial contributes a significant amount of profit to the company despite having only a sales ratio of less than 10%.
GM’s net sales and revenue by year have been on a decline on a long-term basis as reflected in the TTM plot which reached $130 billion USD as of 3Q 2021.
Year over year, GM’s annual net sales and revenue declined by 10% in FY2020 compared to FY2019 but is expected to turn around in fiscal 2021.
While GM’s revenue has been on a record low, it’s the opposite in terms of its operating profit.
GM made record operating profits in the last 5 consecutive quarters, with the latest one totaling $11 billion on a TTM basis.
From a sector perspective, both GM automotive and GM Financial generated an operating profit of $6 billion and $5 billion, respectively, as of 3Q 2021 on a TTM basis, driven primarily by surging demand for the company’s large vehicles, including heavy trucks and SUVs.
Additionally, the operating margin analysis shows that GM Financial is profoundly more profitable than the automotive segment, at about 7X the operating margin according to the results in 3Q21.
References and Credits
1. Financial figures in all charts above were obtained and referenced from GM’s quarterly and annual statements available in General Motors Investor Relations.
2. GMC Sierra HD Denali image is used under creative commons license and sourced from the following websites: GMC Sierra.
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