Uncertainty Could Drag April Sales Below Trend

In a market fraught with uncertainties, Ward’s is calling for 1.13 million light-vehicle deliveries over April’s 27 selling days, an 11.3% daily-sales jump from year-ago, which had 26 selling days.

The effect of production disruptions related to the March disasters in Japan has yet to be fully felt. In the U.S., inventories of most vehicles were high enough to sustain sales through at least the end of the month, barring a complete production shutdown, that now seems unlikely.

However, how auto makers and consumers respond to anticipated shortages may be more important than current stock levels.

Nissan and Toyota both have pulled back April incentives, partly in anticipation of shrinking supplies, though the strategy mirrors seasonal moves previously made by both companies.

While some consumers may view shrinking deals as a signal to hold off new-car purchases, the prospect of sustained vehicle shortages, and accompanying price hikes, may drive others to dealerships.

But the incentives pullback has not been industry-wide. Honda is in the middle of a seasonal push, offering 0% financing.

General Motors, Ford and Chrysler in many cases have carried forward or increased March spending, perhaps with an eye toward conquest sales as competitors suffer from real or perceived inventory shortfalls.

Small-car sales have risen along with gas prices through the first three months. However, the segment’s first-quarter boost is in line with recent seasonal trends.

A continued small-car share increase in April would be a more telling indication that consumer behavior is being affected by gasoline price hikes.

Pump-price volatility could drive some buyers to market sooner in a bid to mitigate future increases, but past fuel-cost spikes often have resulted in a marked decrease in overall consumer confidence, dragging down sales across the nation’s economy.

Related document: Ward’s U.S. Lt. Vehicle Sales and Inventory Forecast

General economic uncertainty is the main factor driving Ward’s forecast 8.8% decline in the daily sales rate from the prior-month, which also had 27 selling days.

This represents a March-to-April sales decline that is 10% greater than recent years, when the month-to-month decrease consistently has tracked at 8%.

At forecast rates, the monthly seasonally adjusted annual rate would drop below 13 million units for the first time in the year’s three months to 12.9 million units.

Despite the projected setback and likelihood of further inventory shortages, Ward’s continues to call for 13.2 million LV sales in 2011, as second-quarter shortfalls are recouped in the second half.

April’s forecast calls for GM to grab 18% of the market, up from its all-time low of 16.6% in March. Ford is expected to account for 17% of deliveries, while Chrysler should take 9.5%.

Toyota’s share is projected to plunge below 14% for the month, with Honda increasing its take to 11.8% from prior-month’s 10.8%. Also look for Hyundai and Kia, combined, to outsell Nissan for the first time since October.

Projected April sales would bring year-to-date deliveries to just under 4.2 million units, an 18.8% increase over like-2010.

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