By Josh Keefe
The auto industry is coming off its best year ever and a strong first quarter has analysts hopeful another sales record will be set in 2016. With the crucial summer sales season approaching, here are five things to look for when WardsAuto releases the official April sales figures tomorrow.
- Will April sales bounce back after a disappointing March?
Last month was the best March the auto industry has had since 2000. But in what is perhaps an indicator of just how hot auto sales have been over the last year, the best March in sixteen years was a disappointment.
The seasonally adjusted annualized sales rate fell from 17.4 million in February to 16.5 million last month, nearly a million short of analyst projections. March was also the first time the annualized sales rate fell below 17 million since last June.
The industry has wondered how long auto sales can continue at historic highs. The March numbers could be an indication auto sales are finally cooling off.
Analysts, however, remain confident that those numbers were an anomaly. Easter fell on the last weekend of March this year. The last weekend of any month is usually the strongest selling day, and the Easter holiday kept people off dealer lots.
“Right now we are tracking sales at 3 percent over 2015, which is pretty good considering that was a record year,” said Jessica Caldwell, senior analyst at Edmunds. “That last week really threw a wrench into March.”
- Can Honda and Nissan continue to defy industry trends?
Japanese automakers Nissan and Honda were some of the industry’s biggest winners last month. Nissan sales rose 13 percent and Honda’s increased 9 percent against the previous year.
What’s remarkable is that these increases were generated mostly by car sales. The rest of the industry has been riding growing light truck sales – which include surging crossovers and small SUVs – while car sales remained relatively flat.
Defying industry trends, Nissan just had the best month in its history at the same time that its cars delivered more sales growth than its SUV line. This is due in large part to the redesigned Maxima and the Sentra.
Honda’s new redesigned Civic is one of the best-selling vehicles in the country. More than 30,000 were sold in April, according to Kelley Blue Book.
- Are increasing fleet sales a sign of a slowdown?
One sign potential sign of industry weakness is an uptick in fleet sales. April fleet sales are expected to increase 4.7% over 2015, according to LMC Automotive.
Fleet sales are essentially bulk sales that are delivered to rental companies and government agencies. They are less profitable than retail sales. Retail sales made up 80.9 percent of total sales volume last April. That number is expected to decline to 80.3 percent in April 2016, according to Kelley Blue Book.
The industry as a whole is seeing a rise in fleet sales. This could simply be timing: these large purchases tend to happen all at once. But it could also be an indicator of weakening consumer demand.
“I’m curious about the retail and fleet mix,” said Tim Fleming, an analyst at Kelley Blue Book. “The worrisome part is if these fleet sales are being used to dump inventory or generate sales or market share.”
GM has publicly made an effort to move its business away from fleet sales over the last few months. This effort has diminished the company’s sales numbers in comparison to other Detroit automakers. But GM believes the realignment is essential for future profitability.
- Will Mitsubishi’s cheating scandal affect U.S. sales?
Mitsubishi is the latest automaker caught lying to regulators and cheating on vehicle tests. The Japanese automaker admitted last week it falsified fuel efficiency tests for the last quarter century.
The cheating scandal appears to be limited to cars sold in Japan. Mitsubishi North America said that no cars sold in the U.S. were affected.
It remains to be seen how this will affect the company’s U.S. sales. The scandal broke late in the month and U.S. consumers haven’t been directly affected. But Volkswagen’s tumbling sales across all product lines in the wake of a scandal that only affected diesel vehicles raises the prospect that the scandal could taint the entire brand.
However, Mitsubishi buyers might not have much of a choice in the cars they buy.
“If you look at credit profile of a Mitsubishi buyer you aren’t seeing top tier credit,” Caldwell said. “So you might not have options.”
- Will prices rise faster than incentives?
Sales incentives have been rising this year. Incentives help move vehicles off dealer lots, but come at the cost of profits. Last month’s disappointing sales occurred during a time of rising incentives, which could indicate trouble.
Rising prices, however, seem to be offsetting the profits lost to incentives. Incentives have increased $300 to $400 per unit over last year, but average vehicle transaction prices have outpaced those numbers, Fleming said. Transaction prices are up $600 to $700 over 2015.