There are at least two major underlying markets at play here: manufacturer-dealer and dealer-consumer.
Recent Bureau of Labor Statistics research paints a colorful picture of market dynamics from 2007-2019[3] where post-GFC increase in domestic competition and the rising cost of manufacturing forced dealers to "innovate" as a way of offsetting new car sales margin decline, which set the stage for 2019-2022[4] where manufacturers largely internalized an outsized supply chain squeeze while dealers gouged the shit out of consumers. So when you say "high-margin", I think you're looking in the wrong bucket.
Then there's GM Financial segment sitting on a $65.322B retail finance receivables portfolio[5] of which 27.2% are sub-680 FICO consumers, and carrying $96.854B of debt[6]...nevermind rising interest rates, increasing layoffs, and a looming credit crunch. Remarks like:
>> In 2021, GM Financial redeemed $1.5 billion in aggregate principal amount of 5.20% senior notes due in 2023. The redemption resulted in a $105 million loss on the early extinguishment of debt.
...buried in page 76 of the fine print suggests internal bleeding damage control.
> How does this business decision make sense?
It doesn't make sense because you're thinking about it from the perspective of consumer optionality based on today's trend, not as a publicly traded business balls deep in competition looking forward.
Considering GM's top 2 selling vehicles are trucks[7] (Silverado = 33.8% of 2022 Chevy units sold; Sierra = 46.7% of 2022 GMC units sold)---and speculating on the retention quality of consumers who would readily classify CarPlay integration as "not negotiable", choosing to overweight an accessory feature that X competitors may also offer over other characteristics/intangibles salient to GM products---I begin to question both the net value prop and opportunity costs being wholesale handed over to Apple.
From GM's latest 10-K filing[1], quickly distilling the past 3 years of consolidated income statements down to its Automotive ex. GM Financial stream:
...and Ford for the sake of comparison[2], distilling down to Automotive ex. Ford Credit and Mobility steams: There are at least two major underlying markets at play here: manufacturer-dealer and dealer-consumer.Recent Bureau of Labor Statistics research paints a colorful picture of market dynamics from 2007-2019[3] where post-GFC increase in domestic competition and the rising cost of manufacturing forced dealers to "innovate" as a way of offsetting new car sales margin decline, which set the stage for 2019-2022[4] where manufacturers largely internalized an outsized supply chain squeeze while dealers gouged the shit out of consumers. So when you say "high-margin", I think you're looking in the wrong bucket.
Then there's GM Financial segment sitting on a $65.322B retail finance receivables portfolio[5] of which 27.2% are sub-680 FICO consumers, and carrying $96.854B of debt[6]...nevermind rising interest rates, increasing layoffs, and a looming credit crunch. Remarks like:
>> In 2021, GM Financial redeemed $1.5 billion in aggregate principal amount of 5.20% senior notes due in 2023. The redemption resulted in a $105 million loss on the early extinguishment of debt.
...buried in page 76 of the fine print suggests internal bleeding damage control.
> How does this business decision make sense?
It doesn't make sense because you're thinking about it from the perspective of consumer optionality based on today's trend, not as a publicly traded business balls deep in competition looking forward.
Considering GM's top 2 selling vehicles are trucks[7] (Silverado = 33.8% of 2022 Chevy units sold; Sierra = 46.7% of 2022 GMC units sold)---and speculating on the retention quality of consumers who would readily classify CarPlay integration as "not negotiable", choosing to overweight an accessory feature that X competitors may also offer over other characteristics/intangibles salient to GM products---I begin to question both the net value prop and opportunity costs being wholesale handed over to Apple.
[1] https://www.sec.gov/Archives/edgar/data/1467858/000146785823...
[2] https://www.sec.gov/Archives/edgar/data/37996/00000379962300...
[3] https://www.bls.gov/opub/mlr/2022/article/automotive-dealers...
[4] https://www.bls.gov/opub/mlr/2023/article/automotive-dealers...
[5] https://www.sec.gov/Archives/edgar/data/1467858/000146785823...
[6] https://www.sec.gov/Archives/edgar/data/1467858/000146785823...
[7] https://www.caranddriver.com/news/g39628015/best-selling-car...