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Ford's March Sales Suffer While GM Outperforms

David Whiston, CFA, CPA, CFE

Automakers reported March U.S. auto sales on April 3 that continue to show consumers’ preference for light truck models over cars. The seasonally adjusted annualized selling rate, or SAAR, came in at 16.6 million versus 16.7 million in March 2016, but total sales fell by 1.7% year over year to 1.55 million and are down 1.6% for all of 2017. We continue to expect 2017 full-year sales of at least 17 million units, but also still believe that the industry is done growing for this cycle. Off-lease supply per J.D. Power estimates for 2017 is 3.4 million, up from 3.1 million in 2016 and 2.3 million in 2015 and should grow to 3.7 million next year. More used supply will lower residual values, which makes leasing a new vehicle more expensive and lowers trade-in values, which also makes buying a new vehicle more expensive than recently. Still, we consider the current sales environment healthy despite the decline and do not see the industry on the verge of a major contraction.

Ford faced a very tough comp with its March 2016 fleet business being the firm’s best fleet month in 16 years. Ford’s overall March 2017 deliveries to final customers fell by 7.2% year over year, with the retail side down 1.5% and fleet down 16.9%. Ford’s overall fleet mix for March was 33.2%, down 390 basis points from March 2016, and rental fleet was 15.7% of March volume, down 100 basis points. F-Series pickups helped Ford’s overall truck volume grow 2.5%. F-Series volume rose 10.1%, with over 81,000 units sold for the truck’s best March in over a decade. Although total company volumes are lower, it is encouraging to hear management say the biggest complaint from dealers is they need more supply of the highest trim packages for trucks and SUVs. Ford’s car volume fell by 24%, while SUVs/crossovers fell by 3.4%. The new Lincoln Continental helped that brand drive retail channel growth of 5%. Lincoln will have a new-generation Navigator SUV out later this year.

General Motors' (GM) March sales bucked the overall industry, with total deliveries up 1.6% and retail channel sales up 5% year over year. Chevrolet and Buick drove the retail growth with gains of 6.2% and 22.1%, respectively. Chevrolet had its best March and first-quarter retail channel numbers since 2007, while Buick had its best March retail sales in 12 years, helped by the new-generation LaCrosse sedan up 60% and the Envision midsize crossover. Buick’s first-quarter retail sales were its best since 2004, helped by its crossovers up 29%. GM’s light truck gains came on the SUV and crossover side rather than from pickups. Silverado's overall March sales fell 11.6%, and the Sierra declined by 14.3%. While the GMC Acadia crossover rose 84% because of the new-generation model released last year, the Chevrolet Tahoe rose 19%, Equinox was up 5.5%, and the Suburban was up 1.7%. We were also glad to see GM’s incentives as a percentage of average transaction prices fall by 140 basis points from February to 13.5%.

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