Market loses traction on critically low stockpiles; Toyota edges GM in Q1

U.S. sales fell again at Toyota Motor Corp., Ford Motor Co., Honda Motor Co., Hyundai, Kia and Subaru last month as tight inventories caused by supply-chain bottlenecks continue to undermine the auto industry's recovery from the pandemic.

Lean new-vehicle inventories, along with rising inflation and gasoline prices that have clouded the economic outlook, resulted in sharply lower March and first-quarter U.S. car and light-truck sales across the industry.

LMC Automotive said the market dropped 22 percent to 1.25 million cars and light trucks in March, with retail sales at just under 1.1 million.

The seasonally adjusted, annualized rate of sales came in at 13.4 million for March, Motor Intelligence and LMC said, the slowest pace of the quarter, and down from 17.8 million in March 2021, which kicked off the industry's hottest three-month stretch on record.

March is typically one of the strongest months of the year, a bellwether of the spring selling season and fueled by heavy promotions. But last month was the fifth-weakest March for volume since 2000, LMC said.

LMC noted one positive development with March: the daily selling rate increased to 46,400 units a day, the highest average in the last seven months, on slightly improved inventories.

First-quarter U.S. sales fell 16 percent to 3.29 million, LMC Automotive said. It was the second-worst quarter for volume in a decade, behind only 2020's second quarter, at the height of the COVID-19 pandemic, Cox Automotive said.

Only four brands -- Tesla, BMW, Mini and Genesis -- posted higher first-quarter volume.

Toyota Motor, with one of the industry's leanest new-vehicle stockpiles, said first-quarter sales skidded 15 percent to 514,592. It was still enough to edge past General Motors by 5,484 deliveries, which reported first-quarter volume slid 20 percent to 509,108.

GM's four brands all posted declines in the latest quarter: 20 percent at Chevrolet, 7.5 percent at GMC, 58 percent at Buick and 24 percent at Cadillac.

Toyota overtook GM as the bestselling U.S. automaker in 2021. GM sales have now dropped three straight quarters.

Toyota said March deliveries slid 24 percent behind declines of 23 percent at the Toyota division and 29 percent at Lexus. It was the eighth consecutive monthly decline at the Toyota brand and second straight dip at Lexus.

Ford Motor deliveries slid 26 percent, with the Ford division down 26 percent and Lincoln off 25 percent. The automaker's pickup sales skidded 34 percent behind a 47 percent drop in F series volume. The new Maverick compact pickup, one of the company's fastest-churning models, helped buoy Ford's truck sales with 8,695 deliveries in March.

Ford said it ended March with 268,00 light vehicles in inventory, up from 199,000 at the end of February but down from 370,000 at the close of March 2021.

Stellantis sold 405,221 vehicles in the first quarter. Overall, total U.S. and retail sales during the period declined 14 percent and 13 percent, respectively, the company said. Volume dropped 2 percent at Jeep and 15 percent at Ram.

Honda Motor Co. sales skidded for the eighth consecutive month, with March deliveries down 27 percent at the Honda brand and 26 percent at Acura. Company officials cited unprecedented low levels of new-vehicle inventory for the latest results.

"We’re riding a bit of a roller coaster due to fluctuating parts supply issues," said Dave Gardner, executive vice president at American Honda. “We aren’t out of the woods yet, but we will continue to manage the supply issues to maximize production and help our dealers meet the needs of our customers.”

First-quarter volume at Nissan plunged 30 percent compared to last year, with the Nissan division falling 29 percent and Infiniti down 41 percent.

Deliveries last month dropped 21 percent at Hyundai, snapping a two-month streak of gains, while Kia deliveries declined 11 percent after an increase of 2.3 percent in February. First-quarter volume also fell at both Korean brands, though Hyundai reported record U.S. retail sales of 159,676 during the period.

Hyundai's top-selling models all posted double-digit declines last month: Santa Fe, down 12 percent; Sonata, off 82 percent; Tucson, down 13 percent; Elantra, off 19 percent, Kona, down 42 percent; and Palisade, off 21 percent.

Hyundai's March results also reflected zero fleet deliveries for the third straight month.

The company said it ended March with 3,057 cars and 14,214 light trucks in stock, down from 3,977 cars and 14,644 crossovers and pickups on hand at the end of February.

Volume fell for the tenth straight month at Subaru, with March sales sliding 34 percent and first-quarter volume down 18 percent.

Volkswagen brand reported first-quarter deliveries slid 29 percent to 64,993, its third consecutive quarterly decline.

Volvo's March sales dropped 5.6 percent, its smallest decline of a seven-month streak, and finished the first quarter off 17 percent.

Among other luxury brands, first-quarter volume rose 3.2 percent at BMW but skidded 35 percent to 35,505 at Audi and 29 percent at Alfa Romeo. Sales rose for the 16th straight month at Genesis, behind a 53 percent increase in March.

Daimler and Jaguar Land Rover will report results this week or later in month.

Even as supplies slowly recover, analysts believe elevated gasoline prices, new-vehicle pricing and rising interest rates will undermine gains and consumer confidence this year, even as job and wage growth remain strong.

"Skyrocketing gas prices were top of mind for consumers in March, but the lack of inventory is what ultimately depressed new vehicle sales in the first quarter," said Jessica Caldwell, executive director at Edmunds.

"Vehicle pricing remains a significant headwind, even as supply improves," said Jeff Schuster, head of global vehicle forecasting at LMC Automotive. "The pandemic and fallout from shortages in the supply chain have fundamentally altered the buying process including how much inventory is carried on dealer lots and the level of incentives going forward. The industry will recover, but much will likely function differently than it did historically."

Sales volume has been averaging just over 1.06 million each month since August.

"Make no mistake, this market is stuck in low gear," said Cox Automotive Senior Economist Charlie Chesbrough.

New-car and light-truck inventories, undermined by production cuts in the wake of the microchip crunch, fell below 900,000 units in March, LMC Automotive and J.D. Power said, and have remained below 1 million since last summer.

The dearth of new cars and light trucks, combined with record-low incentives, continues to push vehicle prices to record highs.

The average new-vehicle incentive is on pace to reach an all-time low of $1,044 in March, LMC and J.D. Power said, a 69 percent decrease from a year ago. TrueCar estimates average incentives slid 51 percent to $1,680 in the first quarter and dropped 54 percent to $1,581 in March. (See chart above, below.)

Average transaction prices are expected to reach a March high of $43,737, a 17 percent increase from a year ago, LMC and J.D. Power predict. First-quarter average transaction prices are forecast to reach $44,129, an 18 percent increase from the first three months of 2021.

Three brands — Kia, Lexus and Toyota — have a 20-day or less supply of new vehicles this month, Cox Automotive said. At the other end of the availability spectrum, Buick, Jeep, Audi, Volvo and Ram had a 50- to 60-day supply of vehicles, less than the industry's longtime norm of 65.

• There were 27 selling days last month vs. 26 in March 2021.
• Edmunds says 41 percent of all new vehicles sold within the first week of arriving at dealerships in the first quarter, compared to 20 percent in the first three months of 2021.
• March fleet sales are forecast to total 143,800, down 36 percent from March 2021when adjusted for selling days, J.D. Power and LMC said, and fleet deliveries are expected to account for 12 percent of light-vehicle volume last month, down from 13 percent in March 2021.
• The average interest rate on new vehicles is 4.6 percent and the average interest rate on used vehicles is 8 percent, TrueCar says.
• The average loan term on a new vehicle for March 2022 is 70 months and the average loan term on a used vehicle is about 71 months, according to TrueCar.