A key question coming from March's U.S. sales results was a simple one: Would the industry gallop out of the month or stumble?
Perhaps it's a limp.
Hidden in a month of mixed signals — sales fell 3.1 percent but the seasonally adjusted, annualized rate came in well above forecasts at 17.42 million — is an underlying current of uncertainty and downright trepidation.
The picture at the retail sales level is not rosy.
Cox Automotive Chief Economist Jonathan Smoke may have said it best: "There are no huge, real solutions as we look six months out."
The trouble signs are everywhere: Auto loan interest rates have reached their highest level in a decade; monthly payments are at record highs; retail sales are softening; loan terms on new vehicles are stretching to nearly six years, on average; and certain consumers — those looking for a car for less than $30,000 — are being pushed out of the new-vehicle market as traditional entry-level segments are being cut.
With the first quarter done and a fog clouding the rest of 2019, the partnership between automakers and their retailers will be tested. Strains are already being felt.
Dealers say factories have renewed their pushes to get retailers to take more new-vehicle inventory. The difference this time? Some dealers are saying no.
True, reworked UAW contracts give automakers more flexibility to idle factories or eliminate shifts than the companies have had in the past. But now there are huge political prices to pay for such moves.
For dealers, the danger in taking on more new-vehicle inventory than needed has been heightened. Interest rates, while still at historically low levels, have risen steadily.
As a result, floorplan is now an expense; not long ago it was a credit. It is a significant swing that impacts profitability.
As new-car sales weaken, managing expenses and inventory will be key. Same goes for the used-car and parts and service businesses.
Many dealers also expect stair-step program targets to increase and be much harder to achieve in the face of softer retail demand. And that can be its own quandary: Hit the target and you make your month; miss and you don't turn a profit.
Tougher times sometimes result in bad habits.
A memo to car dealers and to the industry: Buckle up and buckle down.
Jason Stein is publisher of Automotive News. You may email him at [email protected] Keith Crain's column will return.