DETROIT -- Big sales of big SUVs lead to big profits.
That simple formula has been a key part of General Motors' success in 2016, and its October U.S. sales results suggest more potential for earnings growth in the fourth quarter.
Sales surged 86 percent last month for the Chevrolet Suburban, 81 percent for the Tahoe, 61 percent for the GMC Yukon and 27 percent for the Yukon XL. Taken together, that's a 69 percent gain for those four nameplates vs. just a 4.9 percent increase for other mass-market full-size SUVs, according to the Automotive News Data Center.
In addition, Cadillac Escalade sales rose 9.2 percent, while other large premium SUVs dropped 1.9 percent.
As a result, GM accounted for 45 percent of all large SUV sales last month, up from 35 percent in October 2015 and 36 percent in the first nine months of 2016. In contrast, Ford Motor Co., with the Expedition and Lincoln Navigator, saw its share fall to 6.5 percent in October from 8.7 percent a year before.
That's an especially noteworthy increase because profit margins for large SUVs can easily top 20 percent, according to Morgan Stanley analyst Adam Jonas.
The average transaction price in October for Chevy and GMC's full-size SUVs was $56,630, GM said. That was below the year-to-date average of $59,100 because dealers are discounting 2016 vehicles to make room for the 2017 models.
A big reason GM gained so much share in one month is that fleet sales for the Chevy and GMC SUVs nearly quadrupled, to 8,957 units. A GM spokesman said that was largely sales to commercial fleets and government buyers, which typically bring higher margins than rental-company business.
"We do pretty good commercial business with large SUVs," the spokesman said. "For a long time we haven't had any available capacity to do it."
Fleet was only part of the story, though. Retail sales of the vehicles rose 33 percent to 18,815 units, representing 68 percent of their total volume.
The significance of selling more large SUVs is made clear in GM's annual report, which notes that, despite all the resources invested in developing cars and crossovers, "our profitability is dependent upon the success of full-size pickup trucks and SUVs."