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March U.S. auto sales surged to their highest level in more than five years – with several makers reporting all-time records for the month.
But the overall increase was smaller than the double-digit gains of recent months, raising concerns about whether the unexpectedly strong pace of the automotive recovery will continue – especially in the light of continuing concerns about the impact of Washington gridlock on the overall economy.
Analysts noted that sales incentives have been declining in recent months, even as average transaction prices – what motorists actually pay after adding options and subtracting discounts – has continued rising. On the other hand, pent-up demand appears to be just one of the positive factors likely to keep momentum going after the industry’s worst downturn since the Great Recession.
(The Detroit Bureau: March auto sales tracking at best rate in nearly six years)
“The recovery in U.S. auto sales has continued to outpace the still modest pace of the economic recovery,” said Alec Gutierrez, senior analyst at Kelley Blue Book. “Consumers have been lured into showrooms by a fresh batch of redesigns such as the Ford Fusion, Honda Accord, and Cadillac ATS; as well as low-interest rates and affordable pricing.”
On average, reported Gutierrez, consumers paid “just shy of 94 percent of MSRP” for a new vehicle in March, an increase of a half percentage point over March 2012. Separate analysis by tracking firm TrueCar.com saw transaction prices rise to a near-record $31,087, a 1.5 percent increase year-over-year.
Honda led the March surge, its new Accord driving a 7.1 percent overall gain for the maker last month. The new sedan itself delivered a 36.4 percent sales bump.
(The Detroit Bureau: Lincoln readying potentially major re-launch of MKZ)
General Motors came in just slightly behind, with a 6 percent year-over-year jump, the maker’s best March in five year, “thanks to a strengthening economy and new products, and we are expecting our third consecutive increase in market share versus last year ,” said Kurt McNeil, vice president of U.S. sales operations.
McNeil noted that while sales of smaller cars continue at a “robust” pace, “Trucks have improved in lockstep with the housing market.” That was also good news for Ford which reported a particularly strong month for its highly profitable F-Series pickup line-up.
Ford was also up a reported 6 percent for the month – and would have done even better were it not for the struggles of its Lincoln division. The luxury brand has suffered from an unexpectedly laborious ramp-up of production for its new MKZ sedan, a conscious choice by Ford aimed at heading off some of the quality problems suffered by other, more mainstream 2013 models. But with production now at “launch levels,” according to Lincoln brand chief Jim Farley, the luxury maker is expecting a better performance in April.
(The Detroit Bureau: Nearly 400,000 Hyundai Sonatas targeted by Fed safety probe)
Chrysler is another maker riding the revival of the pickup market, the Ram Truck division gaining 24 percent in March on strong demand for the new Ram 1500 full-size truck. Chrysler saw gains of 5 percent overall and would have done better, officials stressed, if the Jeep brand – down 15 percent for March – wasn’t converting a key assembly plant to prepare for the launch of the critical new Jeep Cherokee.
Volkswagen, which has been on a roll with a mix of new products and the added availability offered by its still-new plant in Chattanooga, reported a 3.1 percent increase in March sales.
“While we are cautious in terms of economic outlook, we expect to see continued growth at a moderate pace in the months ahead,” said Jonathan Browning, President and CEO, Volkswagen Group of America, Inc.
(The Detroit Bureau: Toyota not waiting for L.A. to reveal Corolla replacement)
Last month marketed Volkswagen’s best March in 40 years. And it was by no means alone. Sports car maker Porsche gained 41 percent and had not only its best-ever March but also its best first quarter ever in the U.S. market. Likewise Subaru, posting a 13 percent jump for the month and a 15 percent gain for the first three months of 2013.
Among other foreign makers, Nissan gained just 1 percent in March – but that was still enough to give the maker its best month ever in the U.S. market. Significantly, its new Altima model has begun to pick up traction after a slower-than-anticipated launch last year.
Equally important for the Japanese maker, its little battery-electric model, the Nissan Leaf, had its best-ever month, at 2,236 sales, thanks to the introduction of a new, lower-priced model being built at a new plant in Smyrna, Tennessee. That figure substantially exceeded the volume signaled by Nissan Motor Co. CEO Carlos Ghosn just last week.
(The Detroit Bureau: GM holds the line on trucks)
The world’s best-selling automaker managed to maintain positive momentum for March, though Toyota reported a relatively modest 1 percent gain of its own. But that was enough to keep company executives pleased with the market’s pace of growth.
“A strong first-quarter close and increased consumer confidence continue to position the auto industry as a leader in the economic recovery,” said Bob Carter, senior vice president of automotive operations, Toyota Motor Sales, USA, Inc.
It was hard to find many losers last month – but Hyundai did report a 2 percent drop while sibling Korean carmaker Kia was off 14.6 percent. Both makers have been struggling with production capacity issues.
What’s behind the strong sales surge is a matter of debate, though a variety of factors appear to be at work – and the impact of Washington’s so-called sequester appears to have little impact on rising consumer sentiment. There is little doubt, analysts and industry planners agree, that the market is still benefiting from strong pent-up demand after years of unusually low sales. The first big flood of tax refunds may also have added to the market momentum. Meanwhile, automotive credit has not only become more widely available to sub-prime buyers but interest rates remain at or near historic lows.
That may help offset the decline in incentives offered by most makers. On the whole, they declined by 1.7 percent from March 2012, to $2,523 per vehicle. Honda cut its incentives by 31 percent, to $1,531. Hyundai and sibling Kia were among the few makers to increase incentives – by 10.6 percent, to an average $1,369, still the industry’s lowest.
Meanwhile, Average Transaction Prices – what consumers actually spend after factoring in both options and incentives on top of sticker prices – climbed to $31,087, approaching an industry record and an increase of 1.1 percent since March 2012.