5 Facts Behind March Auto Sales

Most auto manufacturers had good reason to crow about March sales figures released last week: volume jumped 17% over the same month last year. Shares of Ford (NYSE: F ) and General Motors (NYSE: GM ) shares – the first and second place finishers in March vehicle sales – rose 4% between Thursday and Tuesday (both were trading down less than 1% on Wednesday. That 17% increase translates into a fairly strong seasonally adjusted selling rate of 13.1 million vehicles.  But while those numbers are good and continue to show a slow, but steady, strengthening in the domestic light vehicle market, they don't provide a complete roadmap of where the industry has been and where it's going.  Here are a few additional pieces of data to plug into the GPS: The Adjusted Slip.   If you annualize 2011 domestic vehicle sales based on the seasonally adjusted March sales numbers, the projections actually slipped from 13.4 million in February.  To be sure, that's higher than the 12.6 million the industry posted in December 2010 and January 2011.  But the April report will bear watching for signs that the dip in the March rate is more than a blip on the screen.   It's A Long Road Back To Pre-Recession Levels.  It will be good news if the industry sells more than 13 million vehicles this year. That would be consistent with a post-recession market turnaround: automakers ended 2010 with 11.6 million sales, an 11% increase over 2009.  But manufacturers are still miles away from the 17.4 million vehicles sold in 2000, when sales began their decline. Cash For Clunkers May Have Worked Better Than We Think.  About 14 million vehicles were scrapped in 2009, according to according to an industry study.  While that ought to mean that dealers are finding a vast sellers market among car-less consumers, there's an interesting nuance to that equation: they only sold about 10 million vehicles that year. That's 4 million fewer cars and light trucks on the road.  The number of dealerships also dropped 11% between 2008 and 2010. While the U.S driving public is not abandoning its cars en masse for scooters, a new economic uncertainty could once again force many buyers to keep driving their older cars longer.  Japan ‘s Disaster Will Hit The Industry Hard.   The March 11 earthquake, tsunami and subsequent nuclear crisis in Japan will keep at least half of Japan's auto manufacturing facilities off line until at least the first week in May, according to the industry research firm IHS Automotive. Because all automakers depend heavily on Japanese suppliers for parts — and inventories are very lean — as much as one-third of all global vehicle production could be forced to stop during that time, the researchers say. Never Underestimate The Pall Of Oil Price Shifts.   Automakers, like everyone else within the transportation sector, face serious headwinds over oil price volatility.  Auto sales are buffeted by wild pendulum swings in fuel prices because cheap gas boosts demand for bigger, less efficient SUVs, while pricey fuel sparks greater interest in smaller, greener vehicles.  Remember June 2008, when $4-a-gallon gas had buyers clamoring for electric or hybrid vehicles?  With gas prices sinking to the $2 range just five months later, buyers fell back in love with big vehicles again.  That's enough to send vehicle production planners running for cover – and Prozac.   As of this writing, Susan J. Aluise did not hold a position in any of the stocks mentioned here. 
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