March Auto Sales Surge On Economy, New Launches & Discount

Raising optimism, the auto stocks rebounded after suffering sagging sales in February 2018. In fact, major automakers reported significant growth in their March U.S. auto sales. A strong economy, product launches and customer discounts have enabled the auto companies to witness a year-over-year rise in new vehicle sales.

Even concerns of high interest rates and elevated gasoline prices could not prevent Americans from splurging on their liking for sport utility vehicles (SUVs) and pickup trucks. This has resulted in robust unit sales of sport utility vehicles (SUVs), crossovers and pickup trucks.

March 2018 Sales

Per Autodata, auto industry sales rose 2.5% to 1,653,529 while new vehicle sales gained 6% in March. Moreover, seasonally adjusted annual rate (SAAR) was 17.5 million in comparison to 16.8 million, a year ago.

Let’s get a glimpse of a few major companies, which have announced respective monthly sales to determine what drove the sales rise.

Detroit-based automaker General Motors Company (NYSE:GM) posted a sales increase of 15.7% year over year to 296,341 vehicles. This upside was attributable to Chevrolet, GMC, Buick and Cadillac brands, each reporting a rally of 15.6%, 11.4%, 28% and 12.7%, respectively.

Moreover, the crossover sales for Chevy, GMC and Buick witnessed a tremendous surge of 39%, 42% and 50%, respectively.

Based in Michigan, automaker Ford Motor Company (NYSE:F) announced a 3.5% climb in year-over-year sales to 244,306 vehicles, boosted by crossover and truck sales with the respective gain of 7.5% and 6.7%. While the company’s passenger cars witnessed a sales decline of 8.1%.

Further, the company is receiving an encouraging customer response for its F-Series trucks, which contributed $4 billion to the recently reported monthly sales.

Auto-giant Fiat Chrysler Automobiles N.V. (NYSE:F) reported 13.6% growth in year-over-year sales to 216,063 vehicles in the United States. The company’s soaring 44.7% SUV Jeep brand sales pushed the metric impressively up.

Additionally, Chrysler brand’s sales gained 14.9% while that of Ram, Fiat and Dodge brands dropped 13.3%, 47.2% and 1.8%, respectively.

Headquartered in Japan, Toyota Motor Corporation (NYSE:TM) unit sales ascended 3.5% year over year to 222,782 vehicles in the United States. Toyota brand sales rose 4.5% while Lexus endured a 3.2% fall in monthly sales.

Further, sales of crossovers, SUVs and pickup trucks augmented 13.9%, a double-digit rise from the year-ago period whereas passenger car sales deteriorated 6.8%.

Another Japanese carmaker, Honda Motor Co., Ltd. (NYSE:HMC) , improved 3.8% to 142,392 vehicles last month. Honda brand’s sales figure reported a 2.6% rise to 128,855 units, setting a new March sales record while Acura lineup sales shot up 15.7%.

In the meantime, electric vehicle maker Tesla, Inc.’s (NASDAQ:TSLA) first-quarter production has escalated 40% sequentially to 34,494 vehicles. Of the total sales unit, the company manufactured a mix of 24,728 Model S and Model X vehicles with 9,766 Model 3 vehicles. This recent announcement by Tesla, which releases quarterly sales figures instead of monthly data, is in line with the company’s target to manufacture 5,000 units on a weekly basis by the end of the second quarter.

General Motors, Fiat Chrysler, Toyota and Honda sport a Zacks Rank #1 (Strong Buy). While Ford carries a Zacks Rank #3 (Hold), Tesla has a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank stocks here.

Over the past six months, shares of General Motors, Ford and Tesla have decreased 15.8%, 9% and 24.7%, respectively. Meanwhile, shares of Fiat Chrysler, Toyota and Honda have risen 23%, 6.2% and 14.6%, respectively.

Will This Robust Rise Continue?

With swelling demand for SUVs, a bunch of used-vehicles is anticipated to hit the market as customers will return their less-used vehicles at the end of their lease periods. This ample availability of used SUVs at low prices will incite competition for new vehicles. Moreover, the fat discount offered by automakers has some upper limit, beyond which, the car selling becomes economically unprofitable. It is to be seen when the sellers start putting brakes on showering discounts.

On a worrying note, this bloated March auto sales momentum is not expected to continue for the whole year. In 2017, U.S. auto sales dipped 2% after hitting a record-high of 17.55 million units in 2016. A similar downward trend is likely to occur in 2018 as well due to further hike in interest rates during the year and accessibility of used SUVs at cheap rates.

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