Auto sales for March are in and it appears that this was one of the best months in years as high gas prices have encouraged Americans to purchase smaller, more fuel-efficient vehicles. This isn't a new phenomenon as smaller vehicles have been growing in popularity for the past few years, ever since oil topped out at $147 back in July of 2008.
It wasn't all roses for the industry however, as Honda (HMC) actually saw a decline for the month. General Motors (GM), which was expected to see one of the strongest months (+20%), saw sales improve 11.8% compared to March of 2011, and the stock was under pressure as a result. Chrysler was another standout, with sales increasing more than 34% as consumers gravitated towards the new Fiat lineup as well as other Chrysler sedans. Toyota Motor Corp. (NYSE:TM) said sales were up 15%, with sales of the Prius hybrid climbing 54% for the month. Sales at Ford Motor Co (NYSE:F). rose 5% as demand for the Focus small car rose sharply. Volkswagen (VLKAY.PK) continued its strong 2012, gaining more than 34% on strong demand for the new Passat and the new Beetle. For the first three months of 2012, Volkswagen has seen sales increase 47.9% (January), 42.5% (February) and 34.6% (March) for a year to date increase of 40.8% compared to the first three months of 2011.
The industry seasonally adjusted annual rate of sales (SAAR) improved to 14.4 million, which was below the 14.7 million consensus estimate. Unseasonably warm weather, coupled with higher incentives for trucks, higher gasoline prices and what appears to be an improving job market combined for a solid month after two very strong months to start off the year. The following table outlines some of the automakers' monthly sales tally, as well as the year-over-year change, and the change year-to-date.
% Change Y/Y
% Change YTD
All in all it was a good month for the auto industry, but other analysts are looking for the pent-up demand to be released into the market, and in my opinion that has already happened over the past three months. As we get closer to the summer driving season, and with gasoline prices not looking to fall anytime soon, I do not foresee many Americans being willing to go out and purchase that new car, even if it will save them money at the pump.
General Motors continues to underperform; for the first quarter, sales were only up 2.7% compared to the first quarter of 2011. Ford is only up 8.6% for the first quarter compared to 2011; however, I do like the future prospects for Ford a little more. There was some cannibalization with the new Focus taking some market share away from the Ford Fiesta.
All in all it was a good month for the auto industry, with Kia (OTC:KIMTF), Chrysler, and Volkswagen the clear winners. I would still be avoiding shares of GM at this level. I don't like the growth prospects and Europe continues to be a black hole and that doesn't look to be improving anytime soon.
Disclosure: I am long F.