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March U.S. Auto Sales Decline on Weak Demand & High Rates

Zacks Equity Research
In a bid to win solid market share and capitalize on robust truck demand, auto giants are flooding the market with redesigned and efficient versions of pickup trucks.

Maintaining the first couple of months’ performance graph in 2019, the U.S. auto sales’ trajectory persistently slid in March. This continuous plunge in the auto sales so far this year is adding to the woes of the auto companies that are already struggling with weakening conditions in other major global markets.

Through the first quarter of 2019, the auto sales took a hit due to consumers abandoning passenger-cars in favor of the larger, more comfortable pickup trucks and SUVs. Further, soaring vehicle prices along with unfavorable interest rates prompted the consumers to refrain from buying new vehicles. This eventually induced a slump in the sales.

Affordability concerns and high-transaction prices impelled consumers to avoid purchasing new vehicles and opt for inexpensive second-hand vehicles. Per the marketing research company, J.D. Power, the average new-vehicle prices jumped $1,000 year over year to $33,319 in the first quarter of 2019.

Despite softening vehicle demand, the industry sustained its never-ending appetite for trucks in March as well. Last month, Fiat Chrysler Automobiles N.V.’s FCAU pickup brand Ram’s sales rose 15% year over year while General Motors Company’s GM all-new full-size pickups from Chevrolet and GMC are off to a strong start.

In a bid to win a solid market share and capitalize on robust truck demand, auto giants are flooding the market with redesigned and efficient versions of pickup trucks. The changing vehicle buying trend compelled automakers to halt the manufacturing of loss-making car models and focus on the profitable SUVs, crossovers and trucks.

March 2019 Sales

Among the leading auto manufacturers, Detroit-based General Motors doesn’t report monthly sales anymore. However, the company’s first-quarter 2019 vehicle sales declined 7% from the prior-year quarter. Consistent sturdy demand for trucks and SUVs partly compensated the new car sales decline. For the current year, General Motors is bullish on pickups, supported by the launch of more full-size pickups during the second half of the year.

Ford Motor Company F is another auto manufacturer that doesn’t release monthly figures anymore. Although per industry data as reported in Auto blog, the company’s sales are projected to fall 5% year over year in March followed by a 2% dip in the first quarter.

Among other automakers, Fiat Chrysler's March sales decreased 7.4% to 200,307 units. Further, the monthly sales of Toyota Motor Company TM and Nissan Motor Co. NSANY deteriorated 3.5% and 7.2%, respectively while Honda Motor Co. Ltd.’s HMC sales increased 4.3%.

Honda, Ford and Fiat Chrysler currently carry a Zacks Rank #3 (Hold). General Motors has a Zacks Rank #2 (Buy) while Nissan has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term growth rate for Honda, Ford, Fiat Chrysler and General Motors is projected at 1.7%, 9.1%, 8.9% and 8.9%, respectively, while Nissan’s next year growth estimate stands at 11.7%.

What Lies Ahead

In spite of a tough start to the ongoing year, a boost in the housing sales, lower lending rates and a strong labor market along with the arrival of spring are expected to revive the new vehicle sales. Also, the market glutted with the newly-launched vehicle editions might lure the buyers to loosen their purse strings on the new vehicles. However, affordability issues along with tariff woes and smaller tax returns due to the revised laws might delay the auto sales’ recovery in the U.S. market.

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