April auto sales seen up but quake effects loom

DETROIT Mon May 2, 2011 2:21pm EDT

A Ford Motor assembly worker works on the final production line of the 2012 Ford Focus at Michigan Assembly Plant in Wayne, Michigan March 17, 2011. REUTERS/Rebecca Cook

A Ford Motor assembly worker works on the final production line of the 2012 Ford Focus at Michigan Assembly Plant in Wayne, Michigan March 17, 2011.

Credit: Reuters/Rebecca Cook

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DETROIT (Reuters) - U.S. auto sales are expected to show a 16 percent increase for April, as the sales crunch dealt by the Japanese earthquake and tsunami is not expected to show up in new auto purchases until May, automakers and analysts said.

Auto sales are an early indicator each month of U.S. consumer demand. Automakers will release their April U.S. sales figures on Tuesday.

The average forecast of 40 economists surveyed by Reuters was 13 million vehicles on a seasonally adjusted annualized basis, which would be a 16 percent rise from last year's 11.2 million rate and on par with March.

"April looks a lot like March," Ford Motor Co (F.N) sales analyst George Pipas said on Monday, adding that Ford expects a sales rate for the month in the range of low- to mid-13 million.

First-quarter results of major U.S. automakers Ford and Chrysler Group LLC (FIA.MI) as well as auto parts suppliers and dealership groups show that consumer demand is rising.

However, those same dealer groups warned that the real hit on U.S. auto sales will occur in May and June -- a projection backed by Edmunds.com analyst Jessica Caldwell.

"As inventories rapidly deteriorate, April could be the last month that we'll see strong sales numbers until late summer or early fall," she said.

"May and June are traditionally high-volume months, and with anticipated supply constraints -- especially on fuel-efficient vehicles that have been in higher demand with spiked gas prices -- inventories will be exhausted further," Caldwell added.

J.P. Morgan analyst Himanshu Patel said in a research note that the U.S. sales rate could sequentially fall 5 percent to 10 percent in May and June.

But Pipas said Ford does not plan to alter its sales outlook for the year.

Most publicly traded dealer groups are skewed toward Japanese and European import brands, although most groups have warmed to the idea of expanding their sales of Detroit brands.

AutoNation Inc (AN.N) and Group 1 Automotive (GPI.N) both said that they expect sales of Toyota Motor Corp (7203.T), Honda Motor Co (7267.T) and Nissan Motor Co (7201.T) to drop in May and June due to the lack of inventory.

The Japanese automakers are not expected to return to normal production levels until the end of the year.

DETROIT OPPORTUNITIES

As the number of fuel-efficient cars from Japan declines, U.S. brands from General Motors Co (GM.N) and Ford are seen as the most likely to gain, analysts said. Chrysler is still developing its small-car lineup.

This was to be the year that Toyota overcame the negative publicity of its more than 17 million worldwide safety recalls -- most in the United States -- starting in late 2009.

But the earthquake in Japan has dashed that hope as Edmunds expects Toyota's April sales to rise only 2.4 percent from last year, when it relied on incentives to lure consumers back to showrooms.

Truecar.com expects Toyota sales to rise only 1.2 percent, while its market share in the month slips to 14 percent, down from 16.1 percent last year.

Some analysts see Ford as the main beneficiary of Toyota's struggles.

"This benefits Ford over GM," Wall Street Strategies analyst David Silver said. "I don't think GM has the lineup to capitalize on higher fuel costs. Ford has a top pick in every segment of the business, from small cars to SUVs and trucks."

J.P. Morgan's Patel, who also sees a 13 million sales rate for April, said Ford is more likely to benefit on a pricing level as its supply of Fiesta and Focus cars is tight as well. He also expects a "notable" decline in incentives offered by the automakers due to the smaller supplies of cars.

Truecar estimated the industry's average incentive spending in April will be about $2,386 per vehicle, down 4 percent from March and 11 percent from April 2010. Truecar expects an April sales rate of 13.05 million.

Ford's Pipas said the trend of higher prices and lower incentives will continue.

Barclays Capital analyst Brian Johnson, who expects a sales rate in April of 13.2 million, sees the improved pricing discipline shown by the industry continuing through the summer.

(Reporting by Bernie Woodall and Ben Klayman in Detroit, editing by Matthew Lewis)

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