General Motors (GM -0.04%) said its U.S. sales fell 1.3% in 2017 from a year ago, on a planned decline in sales to rental-car fleets and a big drop in demand for its sedans that was almost entirely offset by strong sales of its new crossover SUVs. 

For the month of December, GM's sales fell 3.3% from a year ago, better than the average 7.3% decline expected by Wall Street analysts polled by Bloomberg. GM's December sales decline was smaller than the overall U.S. light-vehicle market's 5.2% decline in December. It was also ahead of the declines posted by most rivals, including Fiat Chrysler Automobiles (FCAU) (down 11%), Toyota Motor Corporation (TM 1.07%) (down 8.3%), and Honda Motor Company (HMC -0.49%) (down 7%).

Of the major automakers doing business in the United States, only one, Ford Motor Company (F 0.08%), managed a year-over-year sales gain (0.9%) in December. 

A red 2018 Chevrolet Equinox crossover SUV on a suburban street.

GM's all-new crossover SUVs hit the U.S. market at just the right time to offset a steep drop in sedan sales. Image source: General Motors.

The good and bad for GM in 2017

GM's U.S. sales team had some things to brag about as 2017 came to a close: 

  • New annual records for sales of pickups and crossover SUVs.
  • An all-time record for sales of electric vehicles. Sales of the Chevrolet Bolt EV rose once again in December; a total of 23,287 Bolts were sold in the U.S. in 2017.
  • A gain in retail market share for its mass-market Chevrolet brand.

But there were also some big points of concern behind the top-level numbers. For starters, nearly all of GM's sedan models had a tough time in 2017, reflecting a broader shift by car-buyers away from sedans and toward crossover SUVs. 

Vehicle 2017 sales Change vs. 2016
Buick LaCrosse 20,161 (26.9%)
Buick Regal 11,559 (41.7%)
Cadillac ATS 13,100 (39.1%)
Cadillac CT6 10,542 15%
Cadillac CTS 10,344 (35%)
Cadillac XTS 16,275 (26.6%)
Chevrolet Cruze 184,751 (2.2%)
Chevrolet Impala 75,877 (21.8%)
Chevrolet Malibu 185,857 (18.4%)
Chevrolet Sonic 30,290 (45.2%)

Data source: General Motors.

As a group, GM's sedan sales were down by a little over 126,000 vehicles, or 18.5%, from 2016. Out of 10 sedan models, only one -- the top-of-the-line Cadillac CT6 -- managed a year-over-year sales gain in the U.S. in 2017. But note: The CT6 was an all-new model in 2016, with the first examples arriving at U.S. dealers near the end of March, so it's not really a fair full-year comparison. And while the CT6 is well regarded by critics, it hasn't sold well lately: CT6 sales were down 35% in December 2017 from the year-ago month. 

Long story short, GM's sedans had a rough year. But there's a positive side to that news, too. As a group, sales of GM's crossover models were up 17%, or about 115,000 units, in 2017 -- nearly offsetting the lost sedan sales.

In retrospect, GM played the market perfectly, launching a slew of all-new crossover models just as the shift in buyer preferences was accelerating. 

A silver Cadillac CTS luxury sedan on a country road.

Critics love the Cadillac CTS, but buyers ignored it in 2017: Sales were down 35%. Image source: General Motors.

The upshot: Expect more of what works from GM

GM executives have seen this coming. Earlier this year, President Dan Ammann explained that GM has been reducing its investments in future sedan models, directing that money to new trucks and additional crossover models instead. 

That's the right approach. At least through the first three quarters, GM had a strong 2017 in terms of profits, thanks in large part to those new crossovers. With all-new versions of its full-size pickups due next fall, and new versions of its midsize pickups and big truck-based SUVs likely to follow in 2019, GM should be able to continue to offset the ongoing decline in sedan sales -- at least as long as the U.S. market remains healthy.