The auto industry headed into the key spring selling season on a down note with most major companies, led by Fiat Chrysler, Toyota and Nissan, posting lower U.S. sales in March.
FCA's U.S. sales dropped 7 percent in March behind another weak month for Jeep, car and minivan demand, even as pickup volume remained strong.
Sales rose 15 percent at Ram, aided by a new pickup and rich incentives. Deliveries fell 11 percent at Jeep, 6 percent at Dodge, 38 percent at Chrysler and 45 percent at Fiat, the company said. Jeep, FCA's top-selling brand and a key source of company profits, has now posted three straight monthly sales declines.
At Toyota Motor Corp., volume dropped for the fifth straight month, with March sales off 3.5 percent on a 13 percent decline in car volume while light-truck demand rose 3.3 percent. Sales fell 5.1 percent at the Toyota division but rose 8.2 percent at Lexus.
Nissan Motor Co.'s March sales fell 7.2 percent behind weaker car and truck demand. Deliveries fell 5.3 percent at the Nissan brand and 23 percent at Infiniti.
Honda Motor Co. bucked the industry with a 4.3 percent gain. The company said it posted record March car and light-truck deliveries at the Honda division. Sales rose 4.1 percent at the Honda brand and 6.4 percent at Acura.
Separately, GM said its first-quarter U.S. sales dropped 7 percent, with volume down 7.8 percent at Chevrolet, 4.4 percent at GMC, 8.7 percent at Buick and 2 percent at Cadillac. The company no longer releases monthly U.S. sales results. GM said its first-quarter U.S. car sales skidded 21 percent, with crossovers, SUVs and pickups accounting for more than 80 percent of mix.
Overall, industry light-vehicle sales are projected by analysts to drop for a third straight month in March, making it the weakest first quarter for volume since at least 2015.
SAAR forecast
The seasonally adjusted, annualized rate of sales is forecast to come in at 16.8 million, based on a survey of 12 analysts by Bloomberg. That would be up from February's 16.61 million rate but below the 17.33 million pace set in March 2018.
"The industry had a tough first quarter but with spring finally starting to show its face and continued strong economic indicators, such as a boost in housing sales, lower lending rates and a strong labor market, we are confident that new vehicle sales demand will strengthen going forward," said Reid Bigland, head of U.S. sales for FCA US.
Most analysts forecast industry sales this year will slip below 17 million for the first time since 2014.
Higher interest rates and rising new-vehicle prices are undermining consumer demand on the retail side.
“Things just keep getting tougher for new-car shoppers,” said Jessica Caldwell, executive director of industry analysis at Edmunds. “Interest rates have crept up every month so far this year, and new vehicle prices continue to hover near record highs. We’re on the cusp of what could be a pretty dramatic shift in the market, simply because a big chunk of buyers are getting priced out.”
LMC last month trimmed its forecast for 2019 U.S. light-vehicle sales by 75,000 units to 16.9 million units, a decline of 2.2 percent from 2018. The company cited lower tax refunds, mixed economic data and the possibility of tariff hikes on imports. And Cox Automotive analysts expect fleet shipments, which boosted the market in 2018, will drop by 200,000 units this year.
U.S. sales fell 2.6 percent through February.
While volume is falling, new-vehicle prices continue to rise, helping pad profits at many automakers.
Kelley Blue Book estimates the average transaction price for a light vehicle in the United States was $36,733 in March, up 2.3 percent year-over-year, lifted by demand for pricey full-size pickups. But when higher interest rates and tighter incentives are factored in, pushing average monthly payments up about $30 from a year earlier, price escalation “is likely contributing to the slower sales pace in the first quarter,” Kelley Blue Book said Monday.
Automaker outlook
Ahead of today's reports, American Honda was the only major automaker projected to post an increase in March sales, according to analysts surveyed by Bloomberg. And its forecast gain is a scant 0.1 percent. Volume was projected to fall 14 percent at Nissan, 11 percent at GM, 7.3 percent at Ford, 6.4 percent at FCA and 5 percent at Toyota. There were 27 selling days last month, compared with 28 in March 2018.
Incentives
Average incentive spending in early March was tracking at $3,689 per new vehicle, a decrease from $3,903 during the same period last year, J.D. Power said. ALG estimates average incentive spending was $3,604 per vehicle in March, down $191, or 5 percent, from a year earlier, and up 0.1 percent from February 2019.
Among full-line automakers, the Detroit 3 and Nissan continue to be the biggest discounters on new vehicles, ALG found. (See chart below.)
Odds, ends
- The average number of days a new vehicle sat on a dealer lot before being sold to a retail customer was 74 days through March 17, up five days from last year, J.D. Power said, signaling that inventories are growing as retail demand slips.
- Fleet shipments are expected to total 367,800 in March, up 2.4 percent from March 2018, J.D. Power said. Fleet volume is expected to account for 24 percent of total light-vehicle sales this year, up from 23 percent in 2018.
- The average interest rate on a new vehicle loan -- 6.36 percent in March -- hit the highest level in a decade, Edmunds said Tuesday, up from 5.66 percent In March 2018 and 4.44 percent five years ago. About 4 percent of all financed deals in March had zero percent interest rates, compared to 7.44 percent last year and 7.59 percent in 2014.
Quotable
“Consumer confidence is waning, but it remains high and indicates that consumers will still be willing to make large purchases. Economic growth is slowing and is expected to return to a more long-term trend level of growth around 2%. Unlike last year, the positive effects of tax cuts will be less pronounced this year. There's uncertainty surrounding the implementation of tariffs on imported autos and auto parts. However, job gains have been steady and wage growth has been accelerating in recent months, which are both net positives for auto sales.”
-- NADA Senior Economist Patrick Manzi
“After a slow start to the year, the retail SAAR has risen each month since January. Consumer sentiment continued to recover in March and the other key drivers of auto sales like employment, wage growth and household balance sheets are healthy. The Fed paused in raising interest rates, which eases a headwind facing auto sales. Overall, the U.S. economy is in solid shape, which bodes well for the industry outlook.”
-- Elaine Buckberg, GM's chief economist
