U.S. Auto Sales Fall Short as Pace Drops to Slowest in 13 Months

Why U.S. Automakers Missed Estimates
  • GM, Ford gains miss estimates while Toyota has surprise drop
  • Annualized rate of 16.6 million follows record 2015 volume

For the past couple of years, automakers have helped keep the economy going as confident consumers raced to replace their aging rides with more luxurious cars and sport utility vehicles. That torrid growth is starting to level off.

All three U.S. automakers posted sales gains that missed analysts’ estimates in March, while Japan’s Toyota Motor Corp. reported a surprise decline. The annualized rate adjusted for seasonal trends fell to 16.6 million, the lowest in 13 months, according to researcher Autodata Corp. The average analyst estimate was for a pace of 17.3 million, up from 17.1 million last March.

Sales fell sharply even as some automakers are starting to spend more on sales incentives than they did last year and some are extending longer-term loans, making it more clear that executives are no longer counting on rip-roaring demand. It also brings the industry more into line with an economy that has been logging steady but not stellar growth.

“It certainly is a comedown from the sales pace of last year,” said Mark Wakefield, a managing partner at consulting firm Alix Partners who predicts industrywide sales may rise about 2 percent from 2015’s record. “We’re into that normal rate of employment where we’re no longer trying to get a lot of people back to work.”

Automakers spent an average of $3,110 on incentives per vehicle sold last month, 14 percent more than a year earlier and up slightly from February, according to Autodata, which is based in Woodcliff Lake, New Jersey. The car companies have boosted discounts each month this year, and consumers didn’t respond as much in March.

“There are some reasons for concern for sure,” said Rebecca Lindland, an analyst with Kelley Blue Book, an automotive-price research firm in Irvine, California. “We’re seeing more incentives and longer loan terms. I’m a little concerned that some consumers could be overextending themselves.”

Consumer confidence in the U.S. dipped slightly in March -- a third straight decline -- as concerns persisted that the world’s largest economy will cool. That sentiment may shift after Friday’s jobs report showed climbing U.S. employment and a pickup in wages.

Trailing Forecasts

Even with relatively cheap gasoline stoking consumers’ demand for SUVs and pickups, General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV all fell short of sales estimates for the month. The shares of all three companies declined, led by a 4.1 percent drop at Fiat Chrysler.

The sales report “plays into the idea that with 2015 being a record year, maybe we’re set up to start peaking a little bit in terms of consumer demand,” said Kevin Tynan, auto analyst for Bloomberg Intelligence.

Light-vehicle sales rose 3.2 percent to 1.6 million, according to Autodata, helped by two more sales days than in March 2015.

Key Results

  • Ford’s light-vehicle sales -- excluding its heavy trucks -- rose 7.8 percent to 253,064, topping GM’s 252,128. Ford was helped by selling more cars to corporate and rental fleet customers.
  • GM’s increase was less than 1 percent, far short of the projected 6 percent, as it pulled back on sales of low-margin cars to rental fleets.
  • Fiat Chrysler’s U.S. sales rose 8.1 percent in March, on the strength of Jeep sport utility vehicles and Ram pickups. The company’s car sales fell 34 percent.
  • Toyota was expected to post a 5.6 percent gain, but sales fell 2.7 percent.
  • Honda Motor Co. missed the forecast of a 16.1 percent increase, rising 9.4 percent.
  • Nissan Motor Co. was an exception, with a 13 percent sales gain that beat expectations. Its deliveries reached 163,559 cars and light trucks, the Japanese automaker said in a statement Friday.
  • Volkswagen AG’s namesake brand dropped 10 percent, declining for a fifth straight month after regulators revealed in September that it cheated on engine tests.

Consumer Loans

Changes in the way consumers are buying vehicles suggest more people are stretching payments out to make them more affordable. There was an increase in March in the number of people buying cars with six-year loans.

Jeff Schuster, senior vice president of forecasting for LMC Automotive, was closer than other analysts to forecasting the month’s softer sales. He cautioned that the market and the economy are still pretty strong and that one month doesn’t mean there will be a decline.

“I think we will see slower growth rates and more volatility for the rest of the year,” Schuster said. While automakers now face tough comparisons to strong months in 2015, demand is still healthy and “it’s nothing to get alarmed about. All eyes will be on April sales.”

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