The global semiconductor shortage and other supply constraints had their biggest impact yet on the auto industry in the third quarter. General Motors (GM 0.08%) wasn't immune. On Friday, the top U.S. automaker reported that domestic-vehicle deliveries plunged by a third last quarter.

Nevertheless, GM stock rose 0.8% on Friday. It gained another 1.6% on Monday, a down day for the market. Let's take a look at why investors don't seem concerned about the sharp drop in the General's U.S. delivery figures.

GM Chart

GM stock performance, data by YCharts.

Supply constraints bite hard

GM has been coping with supply constraints in North America for two years, first because of a six-week union strike in the fall of 2019, then because of pandemic-related plant closures, and finally because of the global semiconductor shortage. However, as recently as the second quarter of 2021, it delivered 688,236 vehicles in the U.S, down just 8% from two years earlier.

Supply shortages finally caught up with the company in the third quarter, during which time General Motors had to pause production for most of its products at one point or another. As a result, it delivered just 446,997 vehicles in the U.S. last quarter, compared to 665,192 deliveries in the year-ago period. In the third quarter of 2019, GM recorded 738,638 domestic deliveries.

Strong product mix and minimal discounting boost profits

While supply constraints have crushed GM's production and sales, the silver lining is that every major automaker faces similar headwinds. That's allowed the General to cut back dramatically on promotions. It's also driven up demand and pricing for used cars, boosting the profitability of GM's financing business.

Additionally, General Motors has prioritized production and sales of its most profitable products to maximize near-term revenue and earnings. Last quarter, full-size trucks and SUVs and the Chevy Corvette sports car combined to account for about 56% of GM's U.S. deliveries. Two years ago, those products accounted for only 40% of the domestic mix.

A dark-colored Chevy Silverado driving on a rural road.

Image source: General Motors.

The net result was that GM's U.S. average transaction price (ATP) reached an incredible $47,467 in the third quarter. In Q3 2019, GM reported an ATP of $37,140 in North America (a fairly good proxy for the domestic market). Moreover, incentives averaged just 4.7% of ATPs last quarter -- a little over $2,200 per unit. In the third quarter of 2019, GM's average retail incentive in the U.S. was nearly $5,200.

Thanks to the incredibly strong pricing environment, General Motors said that it still expects to achieve its updated full-year guidance, which calls for an adjusted operating profit between $11.5 billion and $13.5 billion and adjusted earnings per share between $5.40 and $6.40. That would be particularly impressive because, aside from the impact of supply constraints on production, GM expanded its recall of the Chevy Bolt EV family in August at an expected cost of $1 billion.

More reasons for optimism

GM's ability to reaffirm its full-year guidance despite the severe headwinds it encountered in Q3 clearly helped the stock on Friday.

On Monday, GM shareholders got more good news. Activist investment firm Engine No. 1 revealed a stake in the automaker, saying GM stock could triple within five years. Additionally, Bloomberg reported that GM's driverless-car subsidiary Cruise will soon announce a target of generating $50 billion of annual revenue within a few years.

On a more mundane level, the huge shortage of new vehicles is creating a ton of pent-up demand that should boost auto sales while limiting the need for discounting over the next several years. All in all, the future looks very bright for General Motors -- notwithstanding last-quarter's big domestic-sales decline.