Final Inspection

Hope Springs Eternal From Strong March Sales Performance

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It’s certainly not time to declare market victory yet, but the U.S. auto industry’s March performance is the first sign this year could produce the gains expected – if not outperform some of the more conservative forecasts.

It’s true the month’s annual sales rate of 11.8 million, although well above February’s 10.3 million, remains far below the 15 million-16 million units most industry watchers believe will be the new “trend” line for industry demand.

And it appears stepped-up incentives, sparked by a desperate Toyota, seeking a sudden stop to its string of recall-related poor sales results, played a role in March’s overnight surge, as did strong fleet deliveries industry-wide.

But the results also demonstrate that a number of buyers finally are ready to return to the market, if they believe there’s a good deal to be had.

It’s uncertain whether similar incentive campaigns a year-ago, when Chrysler and General Motors were on their way to insolvency and the overall global economic picture looked its bleakest, would have had anywhere near the same effect on industry sales as it did last month.

Yes, it will be important auto makers don’t fall too deeply back into the incentives trap, beginning another downward spiral in brand equity and vehicle residual values that will cost even more in the long run.

But a little short-term market stimulus to help shake off the cobwebs and get a few more buyers to open their wallets just might be what the doctor ordered to jumpstart industry demand.

Market momentum has the potential to gain speed exponentially. If people begin to see more of their neighbors coming home with a new car or truck, it just might trigger a domino effect on consumer confidence that will ratchet up vehicle demand more quickly than expected.

How much better 2010 will be from 2009 remains unclear, and there are likely to be some more low spots in the recovery between now and December.

But March’s performance certainly suggests volumes are headed in the right direction. All that’s needed now is some deft sales-incentive management to ensure profitability follows right along with it.

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What's Final Inspection?

WardsAuto editors share insights and observations on the global auto industry.

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Dave Zoia

As Editorial Director, I oversee much of what goes into WardsAuto.com, enjoying a ringside seat that lets me observe up close just about every facet of the industry worldwide. I have covered the...

James M. Amend

James Amend is an associate editor at WardsAuto.com, covering day-to-day business and product news at General Motors. He also leads coverage of regulatory and environmental issues, as well as the...
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