FCA snaps skid with 14% gain in March sales

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UPDATED: 4/3/18 10:08 am ET - adds details

Fiat Chrysler Automobiles, behind a 45 percent surge in Jeep deliveries, snapped an 18-month string of monthly declines, with a 14 percent increase in March U.S. light-vehicle sales.

In addition to strong Jeep sales that totaled nearly 100,000 last month, the company said volume rose 15 percent at the Chrysler brand and 364 percent at Alfa Romeo, while sales slipped 13 percent at Ram, 2 percent at Dodge and 47 percent at Fiat.

Retail volume rose 11 percent to 162,304 vehicles, FCA said, with fleet shipments accounting for 25 percent of deliveries last month.

March sales rose 16 percent at General Motors, with each of the company's four brands posting double-digit increases: 16 percent at Chevrolet, 11 percent at GMC, 28 percent at Buick and 13 percent at Cadillac. GM said retail deliveries rose 14 percent.

Ford Motor Co.'s March sales rose 3.4 percent, its first gain of the year, behind a 3.6 percent increase at the Ford division and strong light-truck demand. Volume slipped 2.1 percent at Lincoln.

Toyota Motor Corp. posted a 3.5 percent increase in March volume behind another strong month for truck sales, offsetting weak car shipments. Volume rose 4.5 percent at the Toyota division but slipped 3.2 percent at Lexus.

When other automakers report results later today, analysts expect the industry to post an increase in March volume.

Analysts from LMC Automotive/JD Power, Edmunds and Cox Automotive project volume rose as much as 3 percent last month from March 2017 -- helped in part by an extra weekend of sales. It would be the industry's largest year-over-year increase since September 2017 and the second gain so far in 2018.

In contrast, 2017 started out with eight consecutive months of declines.

“Consumers are keeping the U.S. economy growing and auto sales very healthy,” said Mustafa Mohatarem, GM’s chief economist. “The job market is strong, consumer confidence is at decade-high levels and we see clear evidence that business owners are taking advantage of tax reform to upgrade their fleets.”

Sales continue to be driven by demand for light trucks, notably crossovers, while car volumes remain weak and automakers shy away from deliveries to fleets. Moderate gasoline prices as well as steady job gains are supporting industry sales, automakers and analysts say, even as an era of cheap credit wanes.

“Interest rates are rising as expected and we are looking for a total of four rate hikes in 2018, a headwind making borrowing more expensive and raising monthly payments,” said Jeff Schuster, head of forecasting at LMC Automotive.

Edmunds said average interest rates on new vehicle loans hit their highest level since 2009 in March, marking the second straight month of sharp rate increases. The annual percentage rate on new financed vehicles averaged 5.7 percent in March — compared to an average of 5.2 percent in February and 5 percent in January.

The shift to crossovers, SUVs and pickups continues to propel average new transaction prices higher.

Kelley Blue Book estimates the average transaction price for a new light vehicle in the United States was $35,285 in March. That’s up 2 percent, or $703, from March 2017 but $23 lower than February.

The U.S. new-vehicle market, after seven straight annual gains capped by a record 2016, dropped 1.8 percent to 17.245 million units last year.

Overall, U.S. sales are forecast to drop below 17 million for the first time in three years, with most 2018 estimates from analysts ranging from 16.7 million to 16.9 million units. Sales are off 0.7 percent this year through February.

SAAR outlook

Analysts polled by Bloomberg expect the seasonally adjusted sales rate for March to come in at 16.8 million, down from a pace of 17.12 million in February and March 2017’s 16.82 million rate. GM today estimated the SAAR for March will come in at 17.2 million.

Company outlook

Ahead of today’s reports, March sales were projected by analysts polled by Bloomberg to fall at just two major automakers: Hyundai-Kia, with an anticipated 3.5 percent decline, and Nissan Motor Co., with a 2.1 percent projected drop.

March deliveries were expected to rise 5.1 percent at General Motors, 0.8 percent at Ford Motor Co.; 1.9 percent at FCA US; 3.9 percent at Toyota Motor Corp., 2.1 percent at Honda Motor Co. and 11 percent at VW-Audi.

Spiffs

The average new-vehicle incentive was tracking at $3,849 in the first three weeks of March, J.D. Power says, up $74 from a year ago. Spending on light-truck spiffs is up $160 while car incentives have dropped $54. ALG estimates average new-vehicle incentives rose 8 percent from March 2017 to $3,750 last month, with GM, Fiat Chrysler and Nissan among the biggest average spenders on deals.

Odds & Ends

There were 28 selling days last month vs. 27 in March 2017 ... Fleet sales are expected to account for 22 percent of U.S. light-vehicle deliveries in March, a similar level to last year, Cox Automotive says … J.D. Power says days to turn, the average number of days a new vehicle sits on a dealership lot before being sold to a retail customer, was 70 through March 18, flat with the same period in March 2017 … Light trucks accounted for 66 percent of U.S. light-vehicle deliveries in the first three weeks of the month, the highest level ever recorded in March, J.D. Power says … Incentives, expressed as a percentage of sticker price, stood at 10.3 percent in early March, matching or exceeding the 10 percent threshold for the 20th time over the last 21 months, J.D. Power says.

Quotable

“As a result of aggressive leasing strategies in recent years, there are millions of ‘gently-used’ off-lease vehicles available that provide growing competition for the new-vehicle market.” -- Cox Automotive

“Some of the largest volume brands like Chevrolet, Ford, Nissan and Toyota are demonstrating the largest drop in zero-percent loans year over year. This goes to show how the cost of lending has become increasingly more pricey, and zero-percent financing, while still a desirable incentive, no longer adds the same wow factor for consumers like it used to.” -- Jessica Caldwell, executive director of industry analysis at Edmunds

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