U.S. Auto Sales to Post First Drop in Seven Months on Gas Costs
U.S. automobile sales probably fell for the first time in seven months in March as the crisis in Japan and the highest gas prices in more than two years hurt consumers’ confidence.
March light-vehicle deliveries, to be released tomorrow, may have run at a 12.9 million annual rate, the average estimate of nine analysts surveyed by Bloomberg. While higher than a year ago, it’s less than the seasonally adjusted rate of 13.4 million in February, according to Autodata Corp.
The conflict in Libya helped push gas prices to the highest since September 2008, slowing truck and sport-utility vehicle sales. Confidence among U.S. consumers fell more than forecast to a three-month low this month, the Conference Board said March 29. The group said 3.6 percent of Americans plan to buy a new auto in the next six months, down from 3.9 percent in February.
“A lot of uncertainty in the geopolitical environment, with the crisis in Japan and Middle East unrest, affects consumers’ tendency to make big-ticket item purchases,” said Jesse Toprak, vice president of industry trends at TrueCar.com in Santa Monica, California. “There’s hesitancy by consumers to pull the trigger on car purchases.”
A 12.9 million rate this month would be an increase from the 11.7 million pace in March 2010, and all major automakers except Toyota Motor Corp. (7203) may report gains in deliveries from a year earlier, according to analysts’ estimates compiled by Bloomberg.
Light-vehicle sales in 2010 rose to 11.6 million from a 27- year low in 2009. Deliveries still were 31 percent fewer than the 16.8 million annual average from 2000 to 2007, according to Woodcliff Lake, New Jersey-based Autodata.
Deliveries at Toyota may have slipped 3.6 percent from a year earlier, the average of four analysts’ estimates, as the world’s largest automaker offered smaller discounts. Toyota City, Japan-based Toyota boosted sales incentives 46 percent in March 2010 after it began record recalls earlier that year.
Sales may have gained 24 percent at Honda Motor Co., and Nissan Motor Co. deliveries may have increased 16 percent, the average of four analysts’ estimates.
Global automakers may lose production of 585,000 vehicles this month after the March 11 Japan earthquake and tsunami damaged factories of manufacturers and their suppliers, according to researcher IHS Automotive.
Toyota said last week it has lost output of more than 140,000 vehicles. Honda, based in Tokyo, said it had lost 46,600 vehicles, while Yokohama, Japan-based Nissan said it lost 42,000 units of production from March 14 to March 27.
GM, Ford Sales
GM, which closed its Shreveport Assembly plant in Louisiana the week of March 21 because of a Japan-related parts shortage, may report a 20 percent gain in March deliveries, the average of five analysts’ estimates.
Ford Motor Co. (F) may report a 13 percent increase for March, the average of five estimates. Ford’s increased sales of small cars such as the Fiesta and Focus may help the second-largest U.S. automaker outsell GM, which offered smaller discounts during the month, said Jessica Caldwell, an analyst at industry researcher Edmunds.com.
“The GM and Ford race will be really tight,” said Caldwell, who’s based in Santa Monica, California. “GM came out really strong in the beginning of the year with incentives. When you do that, you’re going to pull ahead sales from later months.”
Automakers may cut incentives and sales to fleet customers to conserve inventories as parts shortages threaten the loss of as much as 100,000 units of production in North America in the near term, said Jeff Schuster, an analyst at J.D. Power & Associates in Troy, Michigan.
“It feels like it’s going to be a little bit more of an impact than just a few vehicle shortages,” said Schuster, who expects the lost output to be made up by the end of the year. “The depletion of inventory of some key imported models could happen a lot faster than we expected entering this month.”
Chrysler Group LLC, based in Auburn Hills, Michigan, may say sales rose 20 percent, the average of five analysts’ estimates. Chrysler and Ford said last week they are restricting dealers’ orders on some vehicle colors after Merck KGaA, a producer of a paint pigment for automakers, lost access to its Japanese factory near a crippled nuclear reactor.
Higher gas prices may drive a shift in market share to cars from trucks and SUVs, according to J.D. Power. The average price of regular unleaded gasoline in the U.S. was $3.54 a gallon this month through March 29, according to AAA.
Shift to Small
GM’s Chevrolet brand has doubled the share of sales it gets from vehicles with four-cylinder engines since 2007, to 46 percent of its retail deliveries this year, the automaker said March 16. Ford, which set monthly records in February for sales of its Fiesta and Fusion cars, sees consumers changing buying patterns, said Mark Fields, Ford’s president of the Americas.
“There is a natural kind of water level that if a gallon of gas goes over, that may shift the market mentality,” Fields said at a factory in Wayne, Michigan, on March 17, after the redesigned Focus small car began production.
For every $1 a gallon increase in U.S. gas prices, the more-profitable light-truck segment may lose 5 percentage points of market share to lower-margin cars, Himanshu Patel, a New York-based analyst at JPMorgan Chase & Co., wrote in a March 22 research note. That would translate to a 56-cent decrease in annual earnings per share at GM, and a 15-cent drop at Ford, he said.
Auto Stocks Decline
“Given the magnitude of recent stock price declines, it appears much of this math has been discounted into both stocks, though market concerns are likely that oil could trend even higher medium-term,” Patel wrote.
GM has fallen 14 percent since Feb. 18, before intensifying violence in Libya sent crude oil prices to the highest in more than two years, to close at $31.55 yesterday in New York Stock Exchange composite trading. Ford has dropped 5.8 percent in that span and closed at $14.86 yesterday.
The following table shows estimates for car and light-truck sales in the U.S. Estimates for companies are a percentage change from March 2010, unadjusted for the difference in selling days. Forecasts for the seasonally adjusted annual rate, or SAAR, are in millions of vehicles.
March had 27 selling days, one more than a year earlier.
GM Ford Chrysler SAAR Himanshu Patel NA NA NA 13.2 (JPMorgan) Itay Michaeli NA NA NA 12.7 (Citigroup) Brian Johnson 35% 7.4% 24% 13.4 (Barclays Capital) Rod Lache 13% 11% 24% 13.0 (Deutsche Bank) Christopher J. Ceraso 18% 21% 16% 12.9 (Credit Suisse) Joseph Barker NA NA NA 12.7 (IHS Automotive) Jeff Schuster NA NA NA 12.7 (J.D. Power) Jessica Caldwell 11% 15% 22% 13.1 (Edmunds.com) Jesse Toprak 24% 8.9% 13% 12.5 (TrueCar.com) Average 20% 13% 20% 12.9 The following table shows estimates for company car and light-truck sales as a percentage change from March 2010, adjusted for the difference in selling days and excluding discontinued brands from a year earlier. GM closed Pontiac, Saturn and Hummer, and sold Saab. Ford sold the Volvo brand and discontinued Mercury. GM Ford Chrysler Brian Johnson 30% 6.5% 20% (Barclays Capital) Christopher J. Ceraso 13% 20% 12% (Credit Suisse) Rod Lache 9.3% 12% 20% (Deutsche Bank) Jessica Caldwell NA NA 17% (Edmunds.com) Average 17% 13% 17%
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