by Susan J. Aluise | May 2, 2013 9:35 am
First up, the good news: The Detroit Big 3 delivered its best April for U.S. auto sales since 2007. Home construction fueled demand for light trucks and SUVs, along with double-digit gains for Ford (NYSE:F), General Motors (NYSE:GM) and Fiat’s (PINK:FIATY) Chrysler.
You know what’s coming, though: the bad news. Despite the strong April performance, a couple of potholes in the road ahead bear watching — figures that suggest, while the industry is recovering, the road back to pre-recession performance may still be bumpy in the near term.
Let’s focus on the silver lining first though. The overall growth in U.S. auto sales was expected: Industry analysts Edmunds.com last month raised its 2013 U.S. sales forecast to 15.5 million vehicles — up from 14.5 million last year.
And after being virtually left for dead during the Great Recession, homegrown automakers have come roaring back. Consumers are taking advantage of low interest rates, while also being attracted to new models to replace the aging clunkers they nursed along during the worst of the financial crisis.
Take a look:
Edmunds Chief Economist Lacey Plache cited “car shopper resilience in the face of continued fiscal issues here at home, and more recently, flare-ups of fiscal drama in Europe,” as driving growth. Pent-up demand continues to be a factor, while consumers are feeling “wealthier” due to rising home prices and a strong stock market.
The vehicle mix driving sales growth, though, was a bit of a surprise. Big trucks and SUVs that were shunned in recent years are now back in vogue. It makes sense when you think about it, though: Strong home construction and growth in oil and gas industries are fueling demand for trucks that can be used on the job.
And while the bottom fell out of the big truck market the last time gas prices soared, the better fuel economy available in today’s models means buyers can go bigger, without buying gas-guzzlers.
Chrysler’s Ram trucks were the company’s top selling model last month, with sales spiking a whopping 49% in April. Jeep Grand Cherokee and Wrangler came in as the automaker’s second and third hottest models, respectively.
Ford’s ever-popular F-series pickups rose 24%, but the company also sported big gains in its Fusion sedan and its Escape small SUV. And despite the disjointed Abe-Lincoln-in-the-mist ad campaign, the redesigned Lincoln MKZ sedan even sparked gains for the troubled luxury brand, selling a record 4,000 vehicles in the month.
At GM, sales of large pickups rose 23%, with the best-seller for the month being the Chevy Silverado, which increased 28% year-over-year. The Chevy Cruze compact and Chevy Equinox mid-sized SUV were also solid.
Still, despite such promise, U.S. vehicle sales grew at their slowest rate since last October and fleet sales to rental companies, government and businesses were lower. While Detroit boomed, for example, Toyota (NYSE:TM) bucked the growth trend last month. U.S. sales slipped 1.1% even as analysts expected gains between 1% and 8%. The company attributed much of the slip to lower fleet sales.
Of course, lower fleet sales aren’t a terrible omen … as long as automakers can continue to boost growth in more profitable retail sales like large pickups, as Detroit automakers did. Plus, once again, the greater fuel efficiency of today’s big trucks should permit them to roll safely through minor fluctuations in gas prices.
With that in mind, the bottom line is that April’s vehicle sales numbers tell a good story of an industry continuing its recovery from the Great Recession’s. The downside, though, is that the waving red flags mean that any downturn in the economy in general — and softening of housing markets in particular — could throw a monkey wrench into the forecasts for the second half of 2013.
As of this writing, Susan J. Aluise did not hold a position in any of the aforementioned stocks.
Source URL: http://investorplace.com/2013/05/detroit-big-3-dominates-april-auto-sales/
Short URL: http://invstplc.com/1nCkn24
Copyright ©2017 InvestorPlace Media, LLC. All rights reserved. 700 Indian Springs Drive, Lancaster, PA 17601.