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US Auto Sales Approach Records as Consumers Defy Global Slump

US Auto Sales Approach Records as Consumers Defy Global Slump

May 3, 2016
The auto industry is on pace for the best April ever as companies are selling more expensive sport utility vehicles and pickups, a clear sign that consumers are confident enough to make big purchases.

The U.S. may be the lone bright spot in an otherwise sluggish global economy as American consumers continue to buy expensive new vehicles at record levels.

With several automakers having reported U.S. sales, companies say the industry is on pace for the best April ever. They’re selling more expensive sport utility vehicles and pickups, a clear sign that consumers are confident enough to make big purchases.

April’s results show a rebound from the first quarter, when sales were at historically high levels but showed slowing growth. If consumers keep buying cars through the summer, when auto sales are typically strong, it could mean that the U.S. economy can withstand the economic malaise around the globe.

“It’s a very nice rebound from the softness we saw in March,” said Jeff Schuster, senior analyst with IHS Automotive in Troy, Mich. “The U.S. economy is set up pretty well to weather the global slowdown. The next several months will be the real test.”

Fewer Rebates

The strong month came even as automakers pulled back on rebates and incentive deals. General Motors Co. said that all carmakers discounted vehicles by about 10% of average transaction prices. In the first quarter, the average discount amounted to 11% of the average sale price, Schuster said.

Fiat Chrysler Automobiles NV said Tuesday that its U.S. sales rose 5.6% in April, beating analysts’ estimates and extending its streak of monthly gains to more than six years -- thanks to the popularity of Jeep SUVs and Ram pickups. Nissan Motor Co. and Toyota Motor Corp. also beat estimates, while Ford Motor Co. and GM missed lofty expectations.

FCA’s sales reached 199,631 cars and light trucks, the automaker said in a statement. That easily beat analysts’ estimates of 4.3% growth. Jeep sales, which boosted the carmaker’s first-quarter profit, jumped 17% from a year earlier, as Compass and Renegade more than doubled. The Ram truck brand gained 12% to 45,810.

“Consumer preference for SUVs and pickup trucks continued unabated in April and helped to propel us to our strongest April sales in 11 years,” Reid Bigland, head of U.S. sales for FCA, said in the statement. The company has been increasing production of SUVs and pickups to meet consumer demand.

Even as consumers slowed new-vehicle purchases in March, a strong labor market, available credit and relatively cheap gasoline will fuel 17.8 million in new car and light truck deliveries in 2016, beating last year’s record, according to a Bloomberg survey.

“There was a little bit of nail-biting in terms of what March was and what it meant going forward,” said Kevin Tynan, an auto-industry analyst with Bloomberg Intelligence. “April was important.”

Nissan Rolling

Nissan was projected to be the biggest gainer among the top automakers and it didn’t disappoint: Sales rose 13%, topping the 11% average estimate. Nissan brand light-truck sales rose 10% to an April record, and the brand set an April record for cars, too, with Sentra up 12% and Altima up 29%.

Toyota’s U.S. sales rose 3.8% in April compared with the year-ago period, slightly beating estimates. That included a 5% increase at the company’s Toyota division, which sold 186,243 cars and trucks in April. The division’s truck sales set a record for the month, with RAV4 sales up 32% and Highlander sales up 9.3%. At Toyota’s Lexus luxury division, sales dropped 3.8%.

Honda Motor Co. sales rose 14%, beating the average estimate for a 10% increase.

Explorer Gains

Ford’s light-vehicle sales rose 3.6%, shy of the average estimate for a 3.8% increase, according to Bloomberg. Sales of the F-Series pickup line rose 13% and SUV sales also jumped 7.7%. The Dearborn, Mich. automaker’s 231,316 total deliveries, including heavy trucks, marked its best April for retail sales in 10 years.

In another sign that consumers are buying expensive vehicles, sales for the Ford Explorer rose 22%. The SUV starts at more than $31,000 and can reach well over $50,000.

GM, the only U.S. automaker projected to report a decline, fell more than analysts had projected as sales dropped 3.5%, compared with the average estimate of a 1.7% drop. All four of GM’s brands were down for the month. The Detroit automaker said it has pulled back on low-margin sales to rental fleet customers and focused on selling more expensive cars to retail buyers, where it reported a 3.3% increase.

Silverado Gains

Chevrolet Silverado sales rose 8.7% to 49,990, and the new Malibu mid-size sedan gained 25% to 21,763, GM said.

The automaker’s pullback on low-margin fleet sales and its focus on retail has resulted in lower-than-expected sales in many months. That’s by design because GM is trying to boost pricing and profits, said Kurt McNeil, GM’s vice president of U.S. sales. The strategy has helped GM post record profits in North America last year and in the first quarter of this year.

For the whole industry, the average projection was for a 17.5 million annualized selling rate for the month, adjusted for seasonal trends. That pace would be an increase of 800,000 from April 2015, which had one less sales day than last month. The month may be even better than anticipated. Fiat Chrysler projected a 17.9 million rate, including medium and heavy-duty trucks, which typically account for at least 200,000.

“A lot of eyes are on auto sales,” Schuster said. “They tend to be out in front of things as it relates to overall health of the economy, of the U.S. consumer. We saw a little bit of weakness in consumer confidence recently, so this should help with that to bring those consumers that are questioning: Where is the U.S. economy right now?”

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Licensed content from Bloomberg, copyright 2016.

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