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Does the U.S. Auto March Sales Indicate the Industry Is Losing Steam?

- By Mayank Marwah

The U.S. auto sales for March fell short of expectations as sales tumbled 1.6%. The seasonally adjusted annual sales rate stood at 16.6 million units, well below the estimates of 17.2 million. The automakers sold 1.56 million cars and trucks in March. After witnessing seven years of rising sales gain and two successive years of record sales, the U.S. auto industry suddenly seems to have stagnated.

Light truck sales surged 5.4% and car sales dropped 11% in March. Sales gain at Nissan (NSANY) and General Motors (GM) could not compensate for the sales decline at Ford (NYSE:F), Honda (HMC), Toyota (TM), Chrysler and Hyundai (HYMTF). As of now, the automakers aren't tensed as they are making huge money on SUVs and trucks. However, what worry the analysts are the huge inventories of cars. Jessica Cardwell, executive director of the industry analysis for Edmunds.com, said: "Trucks and SUVs, although they did well, it's still hard to make up the lack of car sales...You can't have the other side of the industry completely not performing well."

Here's a look at the performance of the automakers.

Performance of U.S. automakers

General Motors was the only U.S. carmaker to make sales gain as it sold 256,224 vehicles in March. The sales gain was attributable to huge volumes of sales of small and midsize SUVs that saw sales rise of 21%. While sales of Chevrolet Tahoe climbed 19%, sales of Chevrolet Suburban rose by 1.7%. In contrast, Chevrolet Silverado pickup sales plunged 11.6%. Ram outperformed Silverado as the former sold 46,384 pickups whereas the latter sold 42,410 pickups. To sum up, sales of GMC and Buick were up 12% and 15%, respectively and sales at Chevrolet and Cadillac plunged 2.2% and 1.5%.

The "Blue Oval" sold 236,250 vehicles in March, down 7% from the same period last year. A number of factors contributed to its sales decline. Ford posted a 17% drop in Fleet sales, 24% drop in car sales and further, a 1.5% plunge in retail demand. Moreover, SUV sales dropped 3.4%. Nevertheless, the customers are pleased with the performance of their F- Series pickup whose sales spiked 10% by selling 81,330 vehicles. Another fact to be noted is that Ford has lost its position to Tesla. Ford is no longer the second most valuable U.S. automaker as it can be seen from their market share. Tesla has market value of $48.63 billion while for Ford, its $45.47 billion.

Fiat Chrysler Automobile (FCA) posted yet another decline, down 4.4%. This is the automaker's seventh consecutive month of sales decline.

Performance of other automakers

The world's largest automaker Toyota's sales were quite shaky, down 9.9% to 97,703 units sold. Poor performance of Toyota brand (down 1.2%) and Lexus luxury lineup (down 7.5%) led to the sales fall. By contrast, the combined sales of SUVs, crossovers and pickup surged 5.5% to 117,521 vehicles.

Nissan, on the other hand, continues to go strong as sales rose 3.2% in March. The Japanese automaker sold 168,832 vehicles. The sales gain was on the back of robust demand for crossovers, attractive incentives and huge gains at Infinite. Nissan brand sales went up a meagre 0.5%. While car sales dropped 15%, truck sales surged 29%. Rogue crossover sold well, up 42.6% to 39,512 vehicles.

As far as Honda is concerned, car sales plunged 8.7% while combined sales of pickup trucks, SUVs and crossovers rose 8.4% to 69,885 vehicles. While Honda brand sales were up 1.8%, Acura luxury lineup posted a sales decline of 21.2%. Furthermore, Accord sedan sales plunged 12.1% to 26,824 units whereas sales rose 23% to 32,872 units for CR- V.

Last word

Despite the fact that sales hit a plateau in March, the U.S. auto industry can draw few positives from it. Sale of cars and trucks continued to remain strong, reflecting consistent demand from customers. However, with current sales being down, there are possibilities that the industry may come up with heavy discounts, incentives or other marketing strategy that may hamper profits.

Disclosure: I do not hold any position in the stocks mentioned in this article

This article first appeared on GuruFocus.