April 3, 2018 / 2:26 PM / 2 years ago

Strong economy, discounts boost automakers U.S. March sales

DETROIT (Reuters) - Major automakers on Tuesday reported higher new vehicles sales for March on the back of a strong U.S. economy and big consumer discounts, sending shares in Detroit’s automakers up.

The 2015 Jeep Grand Cherokee is exhibited at a car dealership in Jersey City, New Jersey, U.S. on July 24, 2015. REUTERS/Eduardo Munoz/File Photo

Industry sales in March rose 2.5 percent to 1,653,529, according to Autodata, which said the seasonally adjusted annual rate for the month was a better-than-expected 17.5 million versus 16.8 million a year ago. Analysts polled by Reuters had expected a March SAAR of 16.9 million.

General Motors Co (GM.N) posted a 16 percent jump in new vehicle sales from the previous March, led by a 14 percent increase in higher-margin retail sales to consumers. Fiat Chrysler Automobiles NV (FCHA.MI) (FCA) reported a 14 percent increase and said it saw a 45 percent spike in sales of its popular Jeep models, giving the brand its best sales month on record.

The strong results for March followed a weak performance in February.

Last year, U.S. auto sales fell 2 percent after hitting a record high of 17.55 million units in 2016. Sales are expected to fall further in 2018 as interest rates rise and push up monthly car payments. Also, millions of nearly new vehicles will return to the market this year after coming off lease, providing a lower-cost alternative for consumers.

GM notched double-digit sales increases across all brands in March, particularly for its SUV and pickup truck models.

“March was an exceptional month for us,” GM’s U.S. head of sales Kurt McNeil said in a statement. “A growing economy and strong new products helped us execute a very successful plan to conquest customers from other brands.”

While GM said its average transaction price was up $900 in the first quarter, the company’s consumer discounts as a percentage of transaction prices hit 14.5 percent in March.

The No. 1 U.S. automaker said earlier on Tuesday it will stop reporting monthly U.S. vehicle sales, saying the 30-day snapshot does not accurately reflect the market and will instead issue quarterly sales.

Other automakers have not yet said whether they will follow suit.

Industry analysts consider discounts of over 10 percent to be unhealthy as they undermine resale values and erode profits.

When issuing a March sales forecast last week, industry consultants J.D. Power and LMC Automotive said industry wide discounts in the first half of the month were at 10.3 percent.

Charlie Chesbrough, senior economist at Cox Automotive, said the impact of the recent U.S. tax overhaul tax “may now be kicking in and lifting the market above previous expectations.”

“Our expectation is that more interest rate increases will occur in 2018 and the resulting higher monthly payments will, eventually, slow the current pace,” he said.

FCA’s retail sales to consumers outstripped those of No. 2 U.S. automaker Ford Motor Co (F.N). But FCA also saw a 22 percent increase in lower-margin fleet sales to rental car companies and government agencies. Over the past year FCA has pursued a policy of cutting fleet sales.

Ford reported a 3.4 percent increase in overall sales for March, led by an 8.7 percent rise in fleet sales. Retail sales were up just 0.8 percent in the month, but Ford said sales of its best-selling F-Series pickup trucks were the best since 2000.

Toyota Motor Corp (7203.T) reported a 3.5 percent increase in sales in March, with double-digit increase in SUV and pickup truck sales offsetting a 6.1 percent decrease in sedan sales. Sales of the company’s completely revamped flagship Camry sedan fell 1.1 percent.

Honda Motor Co Ltd (7267.T) said its March sales rose 3.8 percent, thanks largely to SUV and pickup truck sales. The automaker’s new Accord sedan saw a 9.9 percent sales decrease.

U.S. consumers have increasingly shunned passenger cars in favor of more comfortable, higher-margin SUVs and pickup trucks.

Nissan Motor Co Ltd (7201.T) bucked the trend for the month with a 3.6 percent decline in sales, led by an 8.9 percent drop in sedan sales.

In afternoon trading, GM shares were up 2.8 percent at $36.75, while FCA shares jumped 9 percent to $21.75, and Ford shares were up 2.4 percent at $11.13.

Reporting by Nick Carey; Editing by Tom Brown and Lisa Shumaker

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