GM's Chevy Brand Posts Best First Half In A Century

Bailout Shmailout! Why people are snapping up Chevys

It was just two years ago that General Motors was in bankruptcy, and the company worried that the federal taxpayer bailout required to keep the automaker afloat would sour consumers on its cars.

But apparently the bankruptcy hasn't scared off buyers: Chevy, GM's largest and most important brand, posted its best sales performance in 100 years for the first half of this year.

The news for Chevy in the U.S. is good, with sales up 16%. But it's even better overseas, with Russians, Indians, Europeans and Chinese snapping up Chevy models like the Cruze compact, which has been on sale in the U.S. since last year, and the Sonic subcompact that goes on sale here next month. In total, Chevrolet sold a total of 2.35 million vehicles at home and abroad.

GM has not made any huge strides in quality, with its brands placing 9th (Cadillac), 10th (GMC) and 15th (Chevrolet) in J.D. Power's most recent Initial Quality Study, which measures how consumers score their new cars in the first 90 days of ownership.

But car buyers are responding well to the styling and design of GM's current fleet of Chevys, as well as Buicks, GMCs and Cadillacs. Additionally, GM products have made big strides in becoming much more fuel-efficient. Cars like the Cruze, Buick Regal and even the GMC Terrain achieve 30 mpg or more on the highway, according to EPA estimates, which makes for a lot of consumer interest as gas prices continue to flirt with $4 per gallon in the U.S. and remain much higher than that abroad.

Cruze Control

The most notable model in the GM line right now is the Chevrolet Cruze. Last month, the Cruze unseated the Toyota Camry – the longstanding number 1 seller in the sedan segment – and became the best selling four-door in the U.S. with 24,896 sales. This beat out other segment heavyweights like the new Ford Focus (21,385 sales), Nissan Altima (19,534 sales), Toyota Corolla (18,872 sales) and – its own big sibling – the Chevrolet Malibu (23,737 sales) for the month of June.

Globally, GM has moved an incredible 330,000 Cruze models this year, a 132% increase over last year, and 800,000 total since the model went on sale. GM has said that it expects to break the 1 million mark by the end of the year.

As back to school season nears and gas prices stay high, its conceivable that monthly Cruze sales have not yet topped out and could continue to climb.

Supply Issues Abroad

Of course, all of this great news for GM comes with the giant asterisk that is the lingering supply issues that came as a result of March's devastating tsunami in Japan.

GM competitors Toyota, Honda and Nissan are all still reeling from the destruction and have been unable to move as many models to the U.S. and off of dealer lots. With limited supply, incentives for buying Japanese cars have been small to non-existent, with many models selling at or even above MSRP. Consumers looking for a good deal on a new vehicle have thus found American automakers to be a better option.

Incentives for Japanese cars are starting to inch their way back up, but the damage done in the spring and early summer will be difficult to make up and GM will likely continue to lead the pack in some segments through the end of the year.

Slippery Stock

GM went public again last November, but the share price has dropped 14% since then. Wall Street says that the 27% ownership of GM is still an overhang on the share price. The Feds are expected to sell its remaining stake in GM before next year's Presidential election in order to avoid the hot-button issue during campaign season.

As of Thursday morning, GM stock was up 0.12% to $29.37 per share.

Bottom Line: Even though supply issues have crippled GM's competition, its first-half sales are a huge win for the American automaker. The resounding success of the Cruze should help to silence critics and get Chevrolet back on consumers' radar as they look to buy new cars.

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