April 3, 2012 at 8:54 AM ET
Updated at 2:04 p.m. ET: The auto industry looks set to ride the appeal of smaller cars to its best quarterly performance in almost four years.
Auto sales rose sharply in March, boosted by consumers with more confidence in a recovering U.S. economy who want to buy fuel-efficient cars and trucks in the face of rising gasoline prices.
Strong sales in March are the most convincing evidence yet this year of a sustained recovery in the U.S. auto sector. Analysts said unseasonably warm weather last month drew out American car shoppers. The rise in gas prices to near $4 a gallon coupled with high used car prices also prompted some consumers to buy new vehicles earlier than planned.
Ford's U.S. sales rose 5 percent from a year earlier. Ford, No. 2 in the U.S. market, reported its best March for new auto sales in five years on strong sales of small cars such as its Focus sedan and its F-Series pickup trucks.
Chrysler, No. 4 in U.S. sales, reported a 34 percent increase, led by its Chrysler brand, which had a sales increase of 70 percent.
It was the 24th consecutive month that Chrysler showed a year-on-year sales gain.
General Motors, the No. 1 automaker in U.S. and global sales, said its U.S. sales rose 12 percent in March on solid demand for cars and small crossovers that achieve 30 miles per gallon or better on the highway.
Nissan said its sales in March rose 12.5 percent, and Volkswagen said its March sales soared 35 percent -- its best U.S. March sales since 1973.
Toyota, No. 3 in U.S. sales, saw a 15 percent rise in March sales.
South Korea's Hyundai, which has the best fleet-wide fuel economy ratings in the market, said it expected to have record monthly sales.
"The current level of gas prices will further accelerate the release of pent-up demand as consumers lean towards significantly more fuel-efficient new vehicles while used prices are still strong," Morgan Stanley analyst Adam Jonas said.
Consumer confidence rose in March to its highest level since February 2011, the Thomson Reuters/University of Michigan reading of consumer sentiment showed.
Consumers who held off purchases during the economic downturn -- which led to the worst U.S. auto sales since World War II adjusted for population -- are returning to the market, said Edmunds.com analyst Jessica Caldwell.
In February, auto sales rose to their highest level in four years.
"Vehicle trade-in rates have achieved sustained highs in recent months, which suggests that consumers have decided that they've held on to their cars for too long," Caldwell said. "And with the average credit score for new car buyers at its lowest level since the first half of 2008, the market is clearly becoming a friendlier place for all buyers."
As sales rise, automakers are also getting more profit per vehicle. Incentives continued to trend downward in March while the average transaction prices per new vehicle rose, autos consultant TrueCar.com said on Tuesday.
Auto analysts surveyed by Thomson Reuters expect an annualized sales rate for March of 14.74 million vehicles, which would be a rise from last March's 13.1 million sales rate. Analysts say pent-up demand, easier credit, more fuel-efficient product offerings and mild weather helped boost March sales.
Mike Jackson, chief executive of the nation's largest auto retailer, AutoNation Inc., told CNBC on Monday that the company raised its 2012 sales forecast to about 14.5 million from 14 million, based on the strongest quarter for auto sales since before the sales downturn that began in late 2008.
Incentive spending in March fell about 2 percent industry-wide, rising only for Chrysler, Nissan and Volkswagen, TrueCar.com said. Major automakers are expected to show gains on year-ago sales, led by Chrysler Group LLC, GM and Toyota Motor Corp.
"Automakers have hit the sweet spot this month with lowered incentives and double-digit sales increases, which signifies underlying strength in consumer demand," said analyst Kristen Andersson of TrueCar.com.
Truck sales continue to improve, but the improvements in car sales are relatively stronger, reflecting increased appetite for smaller, more fuel-efficient models, analysts said.
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Reuters and The Associated Press contributed to this report.