General Motors Company (NYSE:GM), the country’s largest automaker by sales, is confident that it will maintain leadership despite plans to cut sales to US car rental fleets in 2016.
According to a report from Reuters, the company’s head of North American operations, Mr. Alan Batey, said in an interview that GM has plans to cut vehicle sales to American car rental companies by 80,000 to 90,000 units this year.
The company sold about 449,000 vehicles to US rental fleets in 2014 and subsequently cut sales to about 400,000 units last year. This year, it plans to book only 310,000 to 320,000 fleet sales in the US. Still, the company has affirmed that it does not expect to report a dip in its commanding market share in the US.
As for February, GM posted a US market share of 17.3%, down 70 basis points from a year-ago. The dip in market share was a surprise for many analysts who were hoping for sales to take off amidst a booming auto industry buoyed by cheaper fuel and low interest rates. GM clarified the dip was majorly due to lower fleet sales.
In the past, automakers like GM and Ford have had to resort to larger fleet sales as a means to withhold their top lines and offset sagging demand from retail car shoppers. These bulk sales – often done at razor thin margins or at cost – helped to keep production up and keep vehicle prices in check.
Now with the US auto industry booming, the automakers are reverting back to a larger share of more profitable retail sales. Stemming from this confidence, GM has said it expects to retain its market share in the US despite dropping fleet sales.
Mr. Batey said that he expects the company’s US market share to stay above 17% on the back of strong retail demand. GM and its other peers are investing heavily in building larger trucks and SUVs – demand for which have been touching historic highs.