Lean U.S. Inventory Could Mean More Production in Second Quarter

U.S. light-vehicle inventory ended March on the lean side but in good shape overall for a market running at a 15.3 million-unit annual sales rate.

However, the relatively low stocks means North American LV production, three-fourths targeted at the U.S. market, may have to be boosted, particularly if sales improve. Currently, second-quarter output is forecast at 5.2% ahead of like-2012.

Inventory totaled 3.24 million units, 17.6% above year-ago and flat with the prior-month total, bucking a trend that normally sees stock levels rise slightly from February to March.

Days’ supply on March 31 also was lower than normal, finishing at 60, not the 65 considered optimal at the end of the first quarter. That marked a decline from February’s 65 days’ supply, but is well above year-ago’s 55.

Keeping pressure on local production, domestic vehicles accounted for 78.6% of U.S. sales in the first quarter, the highest share since 2005.

North American-built midsize cars and cross/utility vehicles appear among those models with the lowest inventories, so that’s where any boost in April-June production likely would be targeted.

March ended with a 62 days’ supply of domestic vehicles, well below the 70 best for this time of year and considering the current pace of market growth.

Specifically, Chrysler, Ford, Honda and Nissan all are short of domestically made Upper Middle segment cars. Ford, GM and Honda also could use more locally built Middle CUVs.

There are pockets where domestic inventory is too high, including Lower Luxury cars. That’s due mainly to the Cadillac ATS and CTS, despite strong overall sales for the brand in March, and Honda’s Acura TL, at a robust 87-day supply.

GM also has a heavy load of large pickups, though that should be alleviated somewhat as production slows in the second quarter for changeover to redesigned models. Ford’s F-Series is on the high side, but the auto maker could be girding for increasingly heated price competition in the segment.

Inventories of Volkswagen’s Upper Small Jetta and Lower Middle Passat are running high, and there’s a surplus of Small Specialty Beetles, too. In total, VW has an 84 days’ supply of domestic cars.

With first-quarter sales down 1% from like-2012, inventory of imported vehicles is 24.2% above year-ago, to 645,700 units. Except for recession-plagued 2009, the import days’ supply of 56 was the highest for March since 2005.

Acura and Volkswagen brands stick out in that regard, and there also is excess inventory of Nissan’s imported Juke, Murano and Rogue CUVs.

However, several luxury brands are running lean, including Audi, BMW, Lexus and Mercedes.

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