24 Jan 18

Why GM expects US commercial fleet market to remain stable in 2018

Photo on top: new Chevrolet Silverado

In spite of a very small dip, 2017 was a very good year for North American car sales, as we reported earlier. Global Fleet spoke with Steve Higgs, Global & North American Fleet Development Manager and Chris Hoolehan, Director for Fleet & Government Sales at GM's Headquarters in Detroit who expect 2018 to be an equally positive year for car sales in general and fleet sales in particular.

Chris Hoolehan: Overall, 2017 was a very good year for GM.

The North American market in general was very strong and was down around 1-2% but that decline had minimal impact on our sales or on the industry.

The total fleet industry was down about 8% in the US but this varies depending on the segment. The commercial segment was up about 1%, the government segment was down about 6% and rental was down about 12%.

Chris Hoolehan (Director for Fleet and Government Sales at GM) and Steve Higgs (Global and North American Fleet Development Manager at GM)

How do you explain these declines?

Chris Hoolehan: The fact that commercial is up, is indicative of the general strong economy, especially in small and mid-sized fleets. The rental is down more by design, especially by GM but some of the other OEMs are also taking a more cautious approach to the rental market to ensure residual values remain strong. Government is down because of tightening budgets at most government agencies.

How do you see the US fleet market evolve in 2018?

Steve Higgs: We're forecasting the fleet market to be pretty much the same as last year, around 3 to 3.1m units for 2018. At the start of 2018 the corporate tax rate has gone down to 22% and that has benefits for large corporations. We'll see how that will be reinvested in new people or equipment and cars.

Why do you not forecast an increase but rather a status quo in this strong economic context?

Steve Higgs: We're very bullish on the total market, retail and fleet, we're still saying the total market will be 17.1m and not 16.8 or 16.9 as some other economists are saying. 

The total volume is somewhat restricted because of our continued view on rental business. In 2017 we achieved a balance between commercial and government versus rental, it was even slightly under 50% for rental. We aim to do that again in 2018 and our local competition is trying to achieve that, too.

Is there a region you want to put extra focus on this year, apart from your home market?

Steve Higgs: Brazil seems to be turning a corner and we're doing very well there. Argentina is also looking good. There is still some political uncertainty in some other countries. Mexico is very strong, though we'll have to see what happens after the elections in 2018.

We sell a lot more vehicles in China than even in the US. It's our strongest market and we produce vehicles there. Often, we're No 1 or No 2 in China.

In Australia and New Zealand, we're investing in products that aren't produced there but that offer a more consistent portfolio than what they've had in the past.

In the other APAC regions like Vietnam or Thailand, you'll see some interesting new vehicles enter the market that are affordable but work well.

What about safety tech and connectivity?

Steve Higgs: There's a very strong push in the US, in Europe, in Australia, less so in South America towards automatic braking. There's also reverse cameras, auto-parking, ...
The developing markets are starting to take notice, too, but that is further down the road. 

There is also technology such as telematics - a bit of a sea change in North America and Europe and it is gradually moving into some of the bigger markets in South America. It measures how the vehicle is used, fuel consumption, oil, tyre pressure, driving style, navigation, it prebooks servicing as the vehicle recognises it needs servicing, ...
Knowing what the vehicle is doing and being able to judge better and forecast what the usage is going to be, enables customers to make better decisions about what you want to do with mobility.
A difference with some other parts of the world such as Europe is that it is less contentious to use telematics technology in North America and a lot of other places.

What will 2018 bring for GM in the US and globally? What are your objectives?

Steve Higgs: The biggest volume vehicles in the US are pickups, which is unusual. We have the all-new Chevrolet Silverado/GMC Sierra, which is going to be very important for us, particularly for fleets.
The gradual move from cars to SUVs is something we're keeping a very strong watch on, we have to manage factories and production around that. One of the benefits of GM going through what it went through 10 years ago is that we are a far more flexible company, able to make much faster decisions and react to market.

Globally we've been launching more SUVs. We're also increasing the number of standard vehicles with differing interior packages to match the market around the world, whatever the type of vehicle.

Does this increased flexibility mean there's a possibility you will come back to Europe?

Steve Higgs: You have to be extremely efficient in Europe with the average vehicle size that is being sold, the vehicle segmentation versus the expectation of equipment, the required efficiency to meet government regulations... As a corporation, if we do not see an opportunity for our shareholders to receive a benefit, we have to make a decision whether we are going to be represented there. I think there are other OEMs out there that will have to make some of those decisions in the future, too.

Authored by: Benjamin Uyttebroeck