A big jump in U.S. sales of GMC Sierra pickups helped General Motors post a retail sales gain in July. Image source: General Motors.

General Motors (NYSE:GM) said on Tuesday that its retail sales in the U.S. rose 5% in July, thanks in part to deep discounts it offered on some models early in the month. GM's overall sales fell 2% on planned reductions in rental-car fleet sales. 

The good, the bad, and the ugly from GM's sales report

  • Chevrolet's retail sales rose 3%, with its Trax, Equinox, and Traverse crossovers and Tahoe and Suburban SUVs all posting sizable year-over-year sales gains at retail. But total sales were down 5.3%, with Silverado pickup sales off 4% from a year ago.
  • Sales of the redesigned Chevrolet Volt rose 83%. They're up 76% for the year through July, with 12,214 sold. That's the Volt's best-ever performance through July. 
  • GMC's retail sales rose 10%, and overall sales were up 4.8%. The retail gain was paced by GMC's pickups, the midsize Canyon (up 34% at retail, 33% overall) and Sierra (up 21% at retail, 13% overall). Supplies of the all-new Acadia crossover are still tight, but GM reported that it's selling briskly, spending an average of just 11 days on dealer lots (30 days is more typical).
  • Buick's surprising retail renaissance continued with a 13% retail sales gain in July. Sales were up 10.4% overall. Buick's top seller continues to be the compact Encore crossover (up 6% at retail, 1% overall), which had its best month for U.S. sales ever. The Encore's siblings, the big Enclave (up 7% at retail, 10% overall) and the all-new Envision (21 days on dealer lots) also did well, as did the upscale Regal sedan (up 16% at retail, 50% overall). 
  • Cadillac sales have suffered from a lack of crossover models (there are several in development), but it managed a 1% gain in both retail and overall sales in July. Inventories of its all-new XT5 crossover are filling out, but it's spending just 25 days on dealer lots. Sales of the compact ATS sedan were up 15% at retail, and the big (and hugely profitable) Escalade SUV posted a 1% gain. 
  • GM's average transaction price (ATP) was $34,887 in July, up more than $1,100 from a year ago, according to J.D. Power estimates provided by GM. Year to date through July, Cadillac's ATP is $53,981, which GM said is the highest among luxury brands. 
  • Combined sales of GM's two full-size pickups, the Silverado and Sierra, rose 0.5% to 76,544 units in July. That handily beat the 65,657 total for rival Ford's (NYSE:F) F-Series, which was down 1% in July from a year ago. 

The distinction between retail and overall sales is significant because GM is deliberately reducing its sales to rental-car fleets in order to focus its production on higher-profit retail business. Year to date, it said, its deliveries to rental-car fleets are down 38% from a year ago. Its sales to (more profitable) commercial and government fleets are up a combined 1% through July. 

Big discounts juiced GM's sales early in the month

GM surprised the industry with an aggressive "sales event" at the beginning of July, offering 20% discounts from sticker prices on many models, including some versions of its full-size pickups. 

That sale seemed to run counter to GM's strategy under CEO Mary Barra. Was GM trading profits for a quick bump on the sales charts? But GM CFO Chuck Stevens defended the move during the company's second-quarter earnings calls, saying the sale was about clearing out 2016 models, and that its incentive spending would be back to its normal levels by the end of July.

GM reiterated the point in its statement on Tuesday:

GM's incentive spending thru July 24th was 14.2% [of average transaction prices]. Final July incentive spend is expected to be in line with domestic competitors. GM's temporary spike in incentive spending resulted from an eight-day sale in early July to begin the sell-down of several 2016 model year vehicles. GM's incentive spending average for the year is 11.4%, compared to an industry average of 11% and well below other domestic and select Asian competitors."

Without naming GM specifically, Ford U.S. sales chief Mark LaNeve suggested on Tuesday that GM's big sale had a significant impact on Ford's results in the first half of July, though he said Ford was able to regain its sales momentum after GM's discounts ended.

GM continues to be more upbeat than rivals

While some automakers (including Ford) have expressed growing concern about a plateauing U.S. new-vehicle market, GM officials remained upbeat on Tuesday.

"Our retail-focused plan is working and as availability of our new cars, trucks and crossovers continues to grow, we expect to keep our retail sales momentum going and our strong margins intact," GM's U.S. sales chief Kurt McNeil said in a statement. "We are growing our retail business while keeping inventories lean, incentive spend disciplined and growing our transaction prices faster than the industry average."

"Low interest rates, full employment, stable fuel prices and increasing wages remain in place and these positive factors continue to point toward a strong second half of the year and another potential record year for the industry," GM chief economist Mustafa Mohatarem said.

GM noted it ended July with a 66-day supply of vehicles in inventory, down from 72 days' worth at the end of June. "Lean inventories reduce the pressure to use incentives to move product and positions the company well if the market begins to soften," the company said in its sales statement.

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