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US Auto Sales Seen Holding Strong in April

Monday, 30 Apr 2012 03:47 PM

 

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U.S. auto sales in April are expected to remain on pace with the previous month, continuing the momentum that saw America's appetite for new vehicles drive first-quarter demand to its highest rate in four years.

"April sales have not been influenced by any extraordinary demand events and appear to be driven by good old-fashioned consumer demand for new cars," Jefferies analyst Peter Nesvold said in a research note.

On average, 41 analysts surveyed by Thomson Reuters expect April sales to hit an annualized pace of 14.4 million vehicles. That would be above the 13.2 million from a year ago, according to Autodata, and would match the March pace. Automakers are scheduled to report U.S. sales for April on Tuesday.

Auto sales are watched as one of the earliest snapshots of American consumer demand. In recent months, the sales figures have proven a bright spot in an economy that expanded at a 2.2 percent annual rate in the first quarter.

But concerns remain about the broader U.S. economy possibly losing steam, as consumers increased their spending only modestly last month and a gauge of business activity in the Midwest fell sharply in April.

Robert W. Baird analyst David Leiker said unseasonably warm weather that likely boosted first-quarter demand could result in a pullback in sales in the current quarter.

Other analysts said the upcoming U.S. presidential election added to uncertainty because it could potentially trigger a change in economic policy.

These are concerns that some investors share, Morgan Stanley analyst Adam Jonas said.

"There's a feeling that the first quarter is as good as it gets. The rest of the year is going to be complicated with more European tail risks and political risk," he said.

U.S. auto sales fell to 10.4 million vehicles in 2009 before rising to 11.6 million and 12.8 million the following two years. Some auto analysts now predict 14.5 million vehicles will be sold this year.

In the 10-year period ended in 2007, U.S. auto sales averaged nearly 17 million annually.

 

REPLACING CLUNKERS

In March, U.S. auto sales rose about 13 percent as consumers energized by an improving job market replaced aging vehicles and took advantage of cheap financing. The strong sales rounded out the best quarter for U.S. vehicle sales since 2008 and raised the prospect that major automakers would have to scramble to boost production and lift cautious full-year sales forecasts.

The auto industry has been in a slow, sporadic recovery for the past two years, and the March sales suggested the pace of the recovery is gathering steam after strong results in the first two months.

One reason analysts and industry experts have cited for rising sales has been the need for consumers to replace aging clunkers as gasoline prices rise, and improved consumer confidence in the wake of a stabilizing job market.

"The increasing health - and more positive outlook - of the U.S. consumer, combined with sustained pressure from pent-up demand, continues to aid the new-car market," Leiker said in a research note.

The average age of vehicles on U.S. roads has risen to near 11 years, the highest on record. Rising fuel prices, combined with lower interest rates, have drawn consumers into showrooms to seek more fuel-efficient replacements.

Jefferies expects an April sales rate of 14 million to 14.2 million vehicles, while research firm Edmunds.com sees 14.4 million as well as the industry's lowest April incentive levels since 2002.

For April, J.D. Power and LMC Automotive predicted light vehicle sales would rise 11 percent to a little more than 1.1 million, translating to an annual pace of 13.8 million vehicles.

Buckingham Research analyst Joseph Amaturo expects a sales pace of 14 million vehicles. He pointed out that April this year had three fewer selling days than last year.

Citi analyst Itay Michaeli said in a research note that he sees an April sales rate in the high 13 million-vehicle range. He said Toyota Motor Corp and Honda Motor Co were gaining retail market share, while General Motors Co and Chrysler seemed to be holding steady, and Ford Motor Co was seeing some weakness.

Ford's stock fell on Friday on concerns that the automaker's full-year profit outlook suggested that second-quarter results might fall short of estimates. The No. 2 automaker also said it lost U.S. market share in April because it cut back incentives too quickly.

Ford shares, which fell 2.3 percent on Friday, were down another 2.8 percent on Monday, trading at $11.22 near the close.

GM shares were down 2.7 percent at $22.89 late on Monday.

CNW said April sales for the overall industry were on pace for an 8 percent increase as more consumers are heading to dealer showrooms to check out the newest cars and trucks.

© 2014 Thomson/Reuters. All rights reserved.

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