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March Auto Sales: Is The Resurgence Sustainable?
March ushered in robust auto sales, with year-over-year comparisons for the month resurgent for many automakers. Across the board, from Ford Motor Co.'s (NYSE:F) strong sales to Toyota Motors' (NYSE:TM) rise in the face of its ongoing problems, sales looked good. Is this sales picture as good as it looks and is it sustainable?
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Ford Continues Its Strength
Ford sales continued to be strong, with a nearly 40% increase over last March, and a 29% improvement over February. Ford, the remaining member of the once-potent big three U.S. automakers, has continued its comeback in the last year. General Motors, which had a net loss of $4.3 billion in 2009, had an impressive sales increase of 43% this March over last. The company, which went through bankruptcy last year, has projected a possible profitable year for 2010.
Toyota, meanwhile, despite battling through its sudden acceleration issues, came out swinging with its incentive-laden sales campaign which boosted sales to a nearly 41% increase over last March. The story was the same with most of the major global automakers as Nissan Motors (Nasdaq:NSANY) was up 43%, Honda Motors (NYSE:HMC) had an 18% gain and Daimler (NYSE:DAI) registered a 28% increase.
Inside The Numbers
The first thing to keep in mind on these auto sales figures is to remember that March 2009, the baseline month for comparison, was the nadir of the recession. This was also the time when GM and Chrysler, two of the former big-three U.S. automakers, were careening toward bankruptcy.
If we unpack some of the sales numbers further, we see that some of the volume, notably in the good-looking GM numbers this time around, is made up of fleet sales. Fleet sales are higher volume, lower margin business. What potential investors are more interested in is if consumers are back to buying cars, on more than a one-month basis. Monthly comparisons as we eventually go through stronger baseline comps will be far more telling.
Toyota Troubles Remain
It's probably a safe guess that Toyota is not yet wildly celebrating its March numbers, as it has a long way to go to overcome its defect and recall issues. Toyota is in the crosshairs of the National Highway Traffic Safety Administration (NHTSA) which will seek a maximum fine of $16.375 million against the company. It's not, of course, that Toyota will be burdened by the amount, but that the U.S. government has more than bared its teeth; it is now biting. The lengthy process of civil litigation is likely to be a constant companion for Toyota.
All-Important Market Share
Beyond the useful question of how long incentives can be used to keep boosting sales, there is the question of market share. Toyota's first quarter market share was 15.1%, down from 17% of the auto market for all of last year. This number will potentially be more important than the incentive-led March sales. Market share also was down for GM, to 18.7% from 19.9% last year.
In GM's case, it is a company that is re-making itself, so its remaining model lines may prove to hold their own against the competition. Chrysler's news is not so good, with its sales figures dropping by 8% from last March; they've got more than even market share to worry about. Ford remains third in the US to GM in sales, slightly behind Toyota, so sales leadership and market share remain very much up for grabs.
The Bottom Line
As the economy normalizes - or at least puts some distance between it and the horrors of the recession, projected auto sales suggest the numbers should exceed last year's weak totals, but that doesn't mean the auto industry is in a renaissance. Not yet. (For more, check out Analyzing Auto Stocks.)
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Ford Continues Its Strength
Ford sales continued to be strong, with a nearly 40% increase over last March, and a 29% improvement over February. Ford, the remaining member of the once-potent big three U.S. automakers, has continued its comeback in the last year. General Motors, which had a net loss of $4.3 billion in 2009, had an impressive sales increase of 43% this March over last. The company, which went through bankruptcy last year, has projected a possible profitable year for 2010.
Toyota, meanwhile, despite battling through its sudden acceleration issues, came out swinging with its incentive-laden sales campaign which boosted sales to a nearly 41% increase over last March. The story was the same with most of the major global automakers as Nissan Motors (Nasdaq:NSANY) was up 43%, Honda Motors (NYSE:HMC) had an 18% gain and Daimler (NYSE:DAI) registered a 28% increase.
Inside The Numbers
The first thing to keep in mind on these auto sales figures is to remember that March 2009, the baseline month for comparison, was the nadir of the recession. This was also the time when GM and Chrysler, two of the former big-three U.S. automakers, were careening toward bankruptcy.
Toyota Troubles Remain
It's probably a safe guess that Toyota is not yet wildly celebrating its March numbers, as it has a long way to go to overcome its defect and recall issues. Toyota is in the crosshairs of the National Highway Traffic Safety Administration (NHTSA) which will seek a maximum fine of $16.375 million against the company. It's not, of course, that Toyota will be burdened by the amount, but that the U.S. government has more than bared its teeth; it is now biting. The lengthy process of civil litigation is likely to be a constant companion for Toyota.
All-Important Market Share
Beyond the useful question of how long incentives can be used to keep boosting sales, there is the question of market share. Toyota's first quarter market share was 15.1%, down from 17% of the auto market for all of last year. This number will potentially be more important than the incentive-led March sales. Market share also was down for GM, to 18.7% from 19.9% last year.
In GM's case, it is a company that is re-making itself, so its remaining model lines may prove to hold their own against the competition. Chrysler's news is not so good, with its sales figures dropping by 8% from last March; they've got more than even market share to worry about. Ford remains third in the US to GM in sales, slightly behind Toyota, so sales leadership and market share remain very much up for grabs.
The Bottom Line
As the economy normalizes - or at least puts some distance between it and the horrors of the recession, projected auto sales suggest the numbers should exceed last year's weak totals, but that doesn't mean the auto industry is in a renaissance. Not yet. (For more, check out Analyzing Auto Stocks.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Greg Sushinsky
Greg Sushinsky is a passionate independent investor, who has done his own research, analysis and investing for 20 years. One of his earliest investing memories was when he first saved and bought U.S. Savings Bonds with his own money as a small child. From there, he studied investing on his own and made small stock purchases as he grew as an investor.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
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