But if March sales of new cars are a truer indication of what the final three quarters of the year holds, then expectations for suppliers may fall far short of the past three years.
The National Automobile Dealers Association (NADA) predicted in late January that sales for new cars and light trucks would reach 15.9 million this year. Although that total is down from the 17.1 million sold last year, the 17.4 million sold in 2000, and the 16.9 million units sold in 1999, NADA’s chief economist felt sales would remain strong this year.
“Given that the preceding three years were the best in the history of automotive retailing, there is momentum for the long-run,” said Paul Taylor. “Working in the industry’s favor this year are positive underlying economic fundamentals.”
One fundamental that Taylor referred to was the earlier lower crude oil prices, which he felt gave buyers about a $100 billion stimulus.
Since he made his projection, however, prices have climbed and a gallon of gasoline has jumped by 30 cents over the past month.
Another factor he mentioned was that a recovering stock market would help boost sales of luxury cars. While Wall Street has had some gains since January, activity on the market has been largely stagnant the past month.
Then in late March, Taylor said that if automakers added incentives for consumers to buy, new car sales could go as high as 16.5 million this year — or 600,000 units above his original projection.
Adding fuel to a higher sales estimate was a recent report from the Conference Board which showed that consumer confidence rose in March by 15 points to 110.2 from an index of 95 in February. Conference Board economist Delos Smith called the rise unprecedented.
“We’ve been doing these numbers since 1967,” Smith told CNBC. “This is the first time we have a 15-point increase in both the present situation and expectations.”
J.P. Morgan analyst David Bradley chimed in that car sales wouldn’t drop.
“With interest rates at a 30-year low, auto sales will be hanging in there as they’ve been hanging in all along,” he said, “and maybe go up from here.”
As for inventories, the industry has about 11 percent fewer cars on hand than it normally does. That lower figure has largely been driven by General Motors, which has cut its inventory by about a quarter. Japanese and Korean manufacturers were also below normal inventories by about 8 percent.
Ford and DaimlerChrysler, however, reported they were about 9 percent above normal numbers, while European carmakers had stock that was 16 percent over their average.
But despite the makings of a rosy economic outlook that could lead to higher sales, the March numbers were glum in the U.S. and mixed in Canada. All Detroit automakers saw their U.S. sales fall last month from March 2001.
Ford took the hardest hit. Sales dropped by 12.7 percent in the U.S., the third straight month of double-digit loss for Ford, and by 5.6 percent in Canada. DaimlerChrysler sales slipped by 4 percent in the U.S. from last March, but grew by 3.2 percent in Canada. GM sales fell by only 1.6 percent domestically, but rose by 5.2 percent across the border. Fewer fleet sales in the U.S. were blamed for the dips.
“There was a big drop in fleet sales, perhaps as much as 20 percent, and a drop in retail sales,” said Nick Lobaccaro, an analyst with Lehman Bros. “Ford appears to have withdrawn the most from incentive activity and may suffer the most.”
But March sales were better in the U.S. for some foreign manufacturers. Toyota had its best ever March with sales going up 4.1 percent, and Hyundai was up 19 percent, marking its 14th consecutive record month. Nissan was up by 15 percent; Honda was up by 2 percent; and Volkswagen rose by 3 percent.
Overall, the industry sold 1.5 percent fewer cars and light trucks last month than it did in March 2001.