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Stock Analyst Update

No Surprises In March Auto Sales Numbers

Ford's sales rise mostly from fleet, while all four brands at GM notch double-digit sales increases.

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Automakers reported March U.S. light-vehicle sales on April 3 that gave us no new concerns about the health of the U.S. auto industry. The seasonally adjusted annualized selling rate was 17.49 million versus 16.82 million in March 2017. Total sales grew 6.4% year over year to 1.66 million, but we calculate a 2.6% rise adjusting for one extra selling day this March. Incentives are likely still high based on recent dealer comments, GM’s incentive spending as a percentage of average transaction prices at 14.5%, and ALG estimating industry incentives increased 8% versus March 2017 (to $3,750 per unit); however, we don't see a reason to change our 2018 sales forecast of 16.6 million to 16.8 million. We expect consumers to keep gravitating to used vehicles due to the continued surge of off-lease volume this year. Balanced against that on the new side will be consumers desire to have the latest tech and safety features as well as a preference for light-truck models. GM’s new generation of crossovers position it well to capitalize on this mix shift. GM also announced it will stop reporting monthly sales and only report quarterly. We are fine with this move as we think monthly sales receive more attention than they deserve, and we agree with GM that trends are more visible in quarterly data than in monthly.

 GM (GM) had a very good month, with total sales up 15.7% and retail channel up 13.8%, with all four brands posting double-digit increases. The company reported its estimated retail share at 17.7%, the highest for the month of March since 2009. GMC had a record March, led by the GMC Terrain’s 99% rise, while Chevrolet had its best March since 2007 thanks to more than 40% increases from each of the Equinox and Traverse crossovers. GM’s prices after incentives were “in line” with March 2017 and up by over $900 in the first quarter. The 14.5% incentive-to-ATP ratio was up less than 100 basis points in March, while the ratio for the quarter of 13.3% declined 80 basis points.

 Ford’s (F) March sales rose 3.4% year over year with the retail channel up only 0.8% and fleet up 8.7% to offset fleet declines in January and February. The F-Series pickup had its best March since 2000 with sales up 7% to over 87,000 units and the truck’s ATPs increased by $1,700 per unit to $46,800. This healthy pricing and a mix heavily skewed to light-truck models helped Ford post overall ATPs of $36,300; likely the highest level of any full-line automaker. The new generation Lincoln Navigator continues to do very well with retail volume more than doubling, ATPs up $25,600, and 80% of the retail channel mix going to the vehicle’s two highest trim packages.

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David Whiston does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.