By Nick Bunkley, Crain News Service
DETROIT (May 6, 2013) — The rate of auto sales in the U.S. in April was the lowest since October, but the parade of high-margin pickups and SUVs rolling off dealership lots gave the Detroit 3 vehicle makers double-digit increases for the month, yielding hefty profits and a spike in market share.
The 46.9-percent share captured by General Motors Co., Ford Motor Co. and Chrysler Group L.L.C. was the highest since September 2011, when the Japanese vehicle makers were dealing with production problems caused by the tsunami/earthquake in Japan. Economic indicators suggest the Detroit 3 will see more gains in the months ahead.
Auto executives and analysts expect the modest-yet-steady rise in the housing market to continue driving pickup sales. In particular, small businesses have become more comfortable making big purchases.
"We have strong confidence the housing market is going to continue to grow and improve," Joe Hinrichs, Ford's president of the Americas, told Automotive News last week, when Ford announced plans to add 900 jobs at its plant in Kansas City, Mo., to build more F-150s.
Sales of full-sized pickups rose 27 percent in April and are up 20 percent for the year.
At the same time, consumers are looking more favorably on larger SUVs again, as auto makers improve fuel economy and gasoline prices ease.
All of that is an ideal combination for the Detroit 3, which finally offer plenty of competitive car models again but would still rather sell their big, brawny—and enormously lucrative—trucks.
GM, Ford and Chrysler all posted double-digit sales increases in April. They added more than 2 points of combined market share at the expense of Toyota Motor Sales, American Honda Motor Co. and Hyundai-Kia Automotive, among others.
In contrast, Toyota's share slid to 13.7 percent, the lowest since June 2012, and the Toyota Camry sedan was outsold by a competing mid-sized model for the second straight month. In April the Camry was topped by the Honda Accord; in March it was the Nissan Altima.
Another sales loser was Volkswagen Group of America—off 3 percent in April, ending a 31-month streak of monthly increases.
Overall, light-vehicle sales increased 9 percent from April 2012, but the industry's seasonally adjusted annualized selling rate (SAAR) fell below 15 million for the first time since October. April's SAAR of 14.9 million was down from 15.3 million in March and 14.1 million a year earlier.
Ford led the Detroit 3 with an 18-percent gain, and it was the only major company to post a larger increase for cars than for light trucks. Chrysler's share of 12.2 percent was its highest since February 2009.
"Nearly every economic pillar of light-vehicle sales is strong enough to keep the SAAR in the 15 to 15.5 million range for the entire year," Kurt McNeil, GM"s vice president of U.S. sales operations, said during a conference call last week. "When credit is available and affordable, the job market is stable, and income and household wealth are increasing, good things happen in the auto sector."
Full-sized pickups have been a big beneficiary of the improving economy. That's a large reason the Detroit 3 are gaining share and increasing profits, since they sold 94 percent of the full-sized pickups last month.
Sales increased 49 percent last month for Chrysler's Ram pickup, 24 percent for the Ford F series and 24 percent for the outgoing versions of GM's big pickups.
Detroit sold an average of one full-sized pickup every 18 seconds in April, with each one producing a profit that analysts estimate at up to $10,000.
"The way the mix is shaking out, that definitely bodes well, especially for the domestic manufacturers," said Alec Gutierrez, senior market analyst of automotive insights for Kelley Blue Book.
"From their perspective, things are going quite well. We don't see any signs of the pickup market slowing down."
Besides pickups, other segments that increased significantly were compact crossovers, up 31 percent, and large SUVs, up 24 percent. Demand for those vehicles is being helped by higher fuel economy and stable gasoline prices.
The nationwide average for a gallon of regular gasoline was $3.52 on April 29, down 16 cents from the end of March and 31 cents less than a year ago, according to the U.S. Energy Information Administration.
"The American consumer's preference for a larger sport-utility vehicle never really went away," Mr. Gutierrez said. "It just took a while for the technology and fuel efficiency to catch up a bit."
Cars up just 3%
Sales of all light trucks increased 15 percent, while cars were up 3 percent. Both compact sedans and luxury sedans rose 11 percent, and all other cars declined 2 percent. Deliveries of hybrids and electric cars were down 3 percent, though sales of the Nissan Leaf quintupled after a $6,000 price cut.
"We're still seeing good year-over-year growth and really high levels of sales for the recovery period," said Lacey Plache, chief economist at Edmunds.com.
"We're not in a really strong recovery, but we never have been," Ms. Plache said. "So we can expect to have these months where we're a little weaker. Things will crop up that will disturb consumers a little bit. We shouldn't be worried yet."
The shift toward light trucks caused the average fuel economy of vehicles sold to decrease last month for the first time this year, according to the University of Michigan Transportation Research Institute. The average EPA rating of vehicles sold in April was 24.5 mpg, down 0.1 mpg from a record high in March.
This report appears on the website of Automotive News, a Detroit-based sister publication of Tire Business.