News Column

Small Cars Spur April Sales

May 4, 2011

Brent Snavely

Auto Dealer

Small and fuel efficient cars were in high demand in April and propelled the industry to a 17.9 percent sales increase for the month as gas prices zoomed past $4 per gallon in many major cities across the U.S.

Automakers viewed April's industry sales as sign that the economic recovery remains on track and the Detroit Three each reported strong results.

General Motors regained its perch from Ford as the nation's highest-volume selling automaker with a 26.6 percent increase in April sales led by the Chevrolet Cruze while Chrysler's sales rose 22.5 percent and Ford was up 16.3 percent.

The gains by the Detroit Three appeared to partly come at the expense of Japanese automakers, who struggled to meet the increased demand for small cars because of production disruptions caused by the March earthquake in Japan.

Toyota's April sales increased just 1.3 percent -- the least of any major automaker -- as the company struggled to supply dealers with enough Priuses and Corollas. Japan's No. 1 automaker said it is down to a 10-day supply of Priuses and a 40-day supply of Corollas. About 50 percent of the Corollas sold in the U.S. are normally built in Japan.

"Our Corolla inventory is below traditional levels and that is really driven by the Japan-sourced Corolla absence," said Randy Pflughaupt, group vice president, sales administration.

Toyota said it will continue to deal with inventory constraints for the next several months, giving competitors an opportunity to gain share if they can increase production of small cars.

Ford estimates that 24 percent of April's retail sales for the industry were compact or subcompact cars compared with about 19 percent in December.

In April, 52.6 percent of all vehicles sold were cars while 47.4 percent were trucks or SUVs on a truck frame. In March, 52.4 percent of all vehicles sold were cars.

Sales of the redesigned Ford Focus increased 22.4 percent in April, and Ford said it could have sold even more if it could have delivered more to dealers. Ford started shipping the redesigned Focus in March.

"Rising fuel prices so far have not discouraged consumers and business owners to purchase new vehicles, but affected the type of vehicles they have purchased," said Jenny Lin, Ford's senior U.S. economist.

The industry's selling rate in April was 13.2 million -- the third month in a row that industry sales exceeded a pace of 13 million. The seasonally adjusted annual sales rate indicates what sales would total for the year if demand remained constant over 12 months, adjusting for seasonal factors. The 13.2 million rate is still far short of the 16 million-per-year rate for much of the 2000s.

"April was a solid month, but the potential of the month was limited by inventory issues that started to emerge especially later in the month," said Jesse Toprak, an industry trend analyst with auto pricing site TrueCar.com. "The industry will have a tough time hitting that figure for the next few months."

With inventories tightening, automakers are increasing prices and cutting incentives.

The average industry incentive shrank to $2,320 in April, down $370, or 13.8 percent, from last April, according to Autodata.

GM said it cut its average incentives and still managed to report a bigger sales increase than any of the seven highest-volume automakers other than Hyundai.

GM said its better lineup of small cars helped its performance in April. Sales of the compact Cruze increased 83 percent compared with the Cobalt, its predecessor.

"We're probably the best prepared ever for this shift," said Don Johnson, GM vice president, U.S. sales operations.

Korean automaker Hyundai, which offers three models that get 40 m.p.g. on the highway and was unaffected by the earthquake in Japan, saw its sales jump 40.3 percent in April.

Korean automakers Hyundai and Kia had a combined market share of 9.4 percent in April, just shy of Honda's 10.8 percent and Chrysler's 10.1 percent share and ahead of Nissan's 6.2 percent.



Source: Copyright (c) 2011, Detroit Free Press


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