March U.S. auto sales seen capping dismal quarter

By Soyoung Kim

DETROIT, March 31 (Reuters) - Major automakers are expected to report lower U.S. vehicle sales for March on Tuesday, ending the first quarter on a weak note and adding to evidence that the housing slump and tighter credit have crimped demand.

A sharp decline in March sales could also heighten concerns that the world's largest market for cars and trucks is on track for its weakest year since 1994, a downtrend that increases pressure on the Detroit-based automakers to cut costs further.

"Consumers feel there is no compelling reason to buy a car right now," Jesse Toprak, executive director of industry analysis for Edmunds.com, said in a research report.

"Some shoppers seem to be waiting for dramatic incentive announcements that seem inevitable, while others are likely more focused on general economic and financial concerns."

Analysts expect U.S. car and light truck sales to drop more than 6 percent in March from a year earlier after adjusting for two fewer selling days compared with last year.

Auto sales represent one of the first monthly snapshots of U.S. consumer demand and could provide more support for the view that the world's largest economy tipped into the start of a recession in the current quarter.

General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz) and Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) shares have dropped 24 percent and 16 percent respectively since the start of the year, reflecting increasing investor concern about the weakness of the economy.

In a note for clients issued on Monday, JP Morgan analyst Himanshu Patel said the price decline had been accompanied by increasing short positions in both stocks.