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Thursday, May 05, 2011

U.S. light vehicle sales advance 18% on demand for fuel-efficient models

U.S. auto sales -- helped by strong retail volume, new models and fuel-efficient vehicles -- rose 18 percent last month as automakers beat back the effects of rising gasoline prices and dwindling supplies of vehicles.

The seasonally adjusted annual sales rate of 13.2 million marked the third straight month above the 13 million mark. Every automaker increased sales as the industry posted its second biggest percentage gain of the year.

South Korea’s Hyundai and Kia paced the gainers with a combined increase of 47 percent. Their three biggest Japanese rivals – Toyota, Honda and Nissan – all lost share as they battled product shortages following the March 11 earthquake. General Motors and Chrysler boosted share.

“There’s a recovery going on in the auto industry and the economy,” Ford sales analyst George Pipas said. “There are more people working today than 2 or 3 months ago, and there’s more income.”

U.S. auto sales are now up 20 percent for the year. Last month’s SAAR of 13.2 million is still well below the industry’s sales peak of more than 17 million units in 2000 and 2001 but a sign that the industry’s recovery is continuing despite rising fuel prices and mixed readings on employment growth and consumer confidence.

GM’s gain was spurred by a 50 percent jump in demand for cars including the new Chevrolet Cruze. But large pickups rose just 2 percent, and sales of some of the automaker’s biggest SUVs slumped.

Ford said sales rose 13 percent last month. At the Ford division, volume jumped 24 percent on higher sales of F-Series pickups and the new Explorer crossover. Both models offer more fuel-efficient powertrains. But at Lincoln, demand eased 1 percent, reflecting a drop in crossover and large SUV sales.

Hyundai, propelled by the new Elantra small car, said sales rose 40 percent to set an April record of 61,754 units. Hyundai said it expects its U.S. retail market share to hit a record 5.7 percent for the month.

Hyundai also said its sales to fleet customers have dropped 45 percent this year, with fleet representing 13 percent of volume year-to-date and 11 percent in April.

Nissan said higher sales of fuel-efficient models such as the Altima, Sentra, Leaf and Rogue offset a drop in truck and SUV demand. Its overall sales rose 12 percent.

But Toyota Motor Co.’s sales rose just 1 percent last month, with Lexus down 4 percent and Scion surging 60 percent.

Toyota-brand car sales dropped 2 percent, while its truck and SUV volume rose 2 percent. Bob Carter, head of Toyota’s American division, said the automaker was looking forward to “healthy inventory” despite the impact of parts shortages from Japan.

Shift underway

The shift to small cars from larger vehicles accelerated last month, as expected, automakers said.

Honda Motor Co. said demand for the sub-compact Fit rose 66 percent to an April record of 8,116 units and sales of the Insight hybrid jumped 35.4 percent to an April record of 2,644 units.

“Consumers are continuing to rethink their vehicle choice," said Don Johnson, head of GM’s U.S. sales operations. “A lot of sales continue to go into the compact car segment as well as the compact crossover segment."

Sales of the Cruze compact topped 25,000 units in April, with retail volume nearly triple the car it replaced, the Cobalt, from a year earlier.

GM said Chevrolet, GMC and Cadillac each set April total and retail sales records for crossover sales, led by a 49-percent increase in combined retail sales of the Chevy Equinox, GMC Terrain and Cadillac SRX.

But demand for the Chevrolet Suburban SUV dropped 31 percent last month. Chevy Tahoe sales fell 16 percent.

GM said its incentives per vehicle dropped by about $400 from March to April, without providing specifics., an online shopping site, estimated GM’s incentives averaged $3,524 last month, up about 6.3 percent from the previous month and up 5.8 percent from a year ago.

Sales outlook

Still, rising gasoline prices and model shortages stemming from the March 11 earthquake in Japan are expected to dampen sales in coming months.

Barclays analyst Brian Johnson this week cut his 2011 sales forecast by 300,000 units to 13.2 million, still among the highest estimates among analysts.

Discounts are forecast to drop 11 percent from April 2010 to $2,386 per vehicle last month, Truecar said.

“With inventory dwindling, automakers didn’t have to spend as much money to move metal,” analyst Kristen Andersson said. “Incentive spending was at its lowest level since January 2006.”

J.D. Power and Associates said new-vehicle retail sales continued to perform well in the second half of April despite growing inventory concerns, specifically compact vehicle supplies.

“Increasing gas prices and shortages in vehicle inventory have yet to trump the overall recovery that has been progressing since the fall of 2010,” said Jeff Schuster, head of global forecasting at J.D. Power.

“However, looking at the remainder of the year, growing uncertainty about gas prices and stockpiles is increasing the risk that that the industry may not reach the expected 13 million-unit level for total light-vehicle sales.”

Gas prices

Average U.S. gas prices -- $3.80 a gallon -- are higher at this point in the year than they were in 2008, when a surge in fuel prices sent industry sales tumbling.

But U.S. car shoppers are responding to higher gas prices by choosing smaller vehicles and engines.

Volkswagen of America said it had its best month since November 2003 because of strong sales of the redesigned Jetta compact sedan. Reflective of a gas-conscious consumer, sales of the compact Tiguan SUV rose 48 percent to 2,791 vehicles and “high-mileage,” diesel-powered vehicles represented 23 percent of all vehicles sold in April, VW said.

Ford says nearly 50 percent of the F-150 pickups it has sold in recent weeks and months have been equipped with one of two new V-6 engines now offered. In April, V-6 equipped F-150s accounted for 50 percent of all 2011 F-150 retail sales, up from 40 percent in March.

During the first 24 days of April, retail sales of small cars represented 23.9 percent of all light vehicle sales, up from 21 percent during the same period in 2010, Ford said.

Overall, retail sales of cars accounted for 52.9 percent of industry sales, up from 51.7 percent during the first 24 days of April 2010.

Minivans and pickups lost ground industry-wide in April, Ford said.

Decent truck demand

Still, truck demand has remained resilient despite the surge in gas prices.

Sales of the redesigned Porsche Cayenne SUV have surged 141 percent this year. Land Rover sales are up 19 percent. Chrysler reported a 29 percent jump in Ram pickup sales last month, and year-to-date sales are up 36 percent to 70,419 units.

Ford sold 45,435 F-Series pickups in April, an increase of 11 percent from a year ago, and sales are up 20 percent year-to-date. Ford Expedition SUV sales rose 8 percent last month and are up 15 percent for the year.

Analysts say wealthy consumers and small business owners are behind the rise in truck and SUV sales.

“Rising gas prices are pressuring truck sales, but the impact is more manageable this time around,” Johnson said in a report Monday.

“We estimate less share loss than in 2008 for large trucks as most discretionary buyers have already moved away from the segment.”

Dealers are also bracing for a shortage of models built in Japan.

Honda on Monday became the latest Japanese automaker to warn of more inventory shortages following the March earthquake in Japan. The quake, tsunami and nuclear crisis have disrupted parts production across Japan, forcing Honda, Toyota and other automakers to curtail output.

Honda said today its U.S. sales rose 10 percent last month, and are up 17 percent year-to-date.

“While our current dealer supply of vehicles remains adequate, we know that production constraints may start to affect sales into the summer months,” John Mendel, executive vice president of sales for American Honda, said today. “We are working closely with our dealers, and together we are committed to continue our focus to support the needs of our customers.”

The inventory shortfall is expected to become more acute with smaller models such as the Honda Fit and Toyota Prius hybrid that are only assembled in Japan.

Prius demand dropped 4.3 percent last month, reflecting tightening supplies and a reduction in incentives.

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