DETROIT – Passenger car sales continued to plummet last month and were a drag for many automakers, even with offers of some very juicy discounts.
For now, the auto industry isn't worried because it's making solid money selling reams of SUVs and trucks to consumers who are loading them up with expensive features. But some analysts see the large inventories of cars as a looming problem.
Toyota, Ford, Fiat Chrysler and Honda each reported sales declines for March, all due to tumbling car sales. General Motors, Nissan and Volkswagen sales rose due largely to SUV sales as most major automakers reported March sales figures on Monday.
Ford suffered the biggest loss with a 7.5 percent drop, followed by Fiat Chrysler at 5 percent, Toyota at 2 percent and Honda at just under 1 percent. Nissan sales were up over 3 percent, Volkswagen's rose just under 3 percent and GM posted an increase of just under 2 percent.
Analysts were expecting a 2 percent to 3 percent increase for the industry overall in March, the first monthly sales jump this year. But some automakers' figures were below estimates. A final industry tally comes out later Monday.
Analysts see some warning signs in the figures and some cautioned that sales could slow later this year.
Drawing in buyers required a lot of cash, low-interest loans and other incentives. Dealer stocks are growing because cars and trucks aren't moving off the lots as fast as they did in the past.
The LMC Automotive consulting firm said incentives hit a March record, averaging $3,768 per vehicle and the highest amount since March of 2009. In addition, cars and trucks are sitting on dealer lots for an average of 70 days, the highest level for any month since July of 2009 during the sharp economic downturn.
Jessica Caldwell, executive director of industry analysis for the Edmunds.com car-buying website, says if inventories aren't reduced, automakers will have to offer even more incentives, which will reduce industry profits. Even some truck and SUV inventories are starting to climb, she said.
Since vehicle values could fall if demand falters, that could mean an end to sweet lease deals for consumers, she said. That could mean lower sales, production cuts and a drag on the economy in a worst-case scenario, she said.
Yet even at Ford, which saw a 24 percent decline in car sales, executives were happy with monthly numbers largely because of a 10 percent increase in sales of the F-Series pickup.
Vice President of Sales Mark LaNeve said buyers are loading out the trucks with premium options, boosting average sale prices by $2,500 over a year ago.
"(Sport) Utilities and trucks are trucks are very positive in terms of our economics," he said. "If you think about it, it means revenue is up."
Ford's numbers were reflected in industry figures. LMC says average prices rose to $31,074, beating the previous March high of $31,049 set last year. Caldwell said people are going for more expensive features such as leather seats, premium sound systems and electronic safety devices.
Dealers concede their inventories are on the rise, but Mark Scarpelli, owner of Chevrolet, Kia and Fiat Chrysler dealers north of Chicago, said he considers it a normal part of the business cycle.
In the Midwest, Scarpelli said, dealers build inventory during cold-weather months in preparation for the spring and summer selling seasons. "It's how the course has been run over the past number of years," Scarpelli, who also is chairman of the National Automobile Dealers Association. "There might be some higher inventory levels on certain car lines or truck lines, but that's going to happen in good times or bad."
Automakers also are raising incentives a bit to keep sales moving, he said.
At Honda, car sales fell 8.7 percent, while truck and SUV sales rose 8.4 percent. Fiat Chrysler's car sales dropped 14 percent and SUV sales were down 4 percent. But truck sales rose 6 percent.
GM's gain came mainly from small and midsize SUVs with a 21 percent increase. For example, the Buick Encore compact SUV saw a 29 percent increase.
Nissan's overall sales rose 3.2 percent with trucks and SUVs rising 29 percent for the Nissan and Infiniti brands combined. The Rogue small SUV set a March sales record of nearly 40,000 vehicles, 43 percent increase.
Source: www.bing.com