Market shifts back into higher gear in April

The U.S. market for new cars and light trucks shifted back into a higher gear in April.

Sales tallied 1.36 million vehicles last month, up 10 percent from April 2022, LMC Automotive said Wednesday, with retail sales around 1.06 million and fleet sales of approximately 296,000, or around 22 percent of industry volume.

Of the seven automakers that report monthly, Honda Motor Co. surged, Ford and Toyota Motor Corp. edged up, and Hyundai and Kia racked up sales in April for the ninth-straight month, signaling pent-up demand remains healthy even as rising interest rates cool the U.S. economy and consumer confidence.

Higher inventories combined with more generous rebates at many automakers are supporting retail volume, analysts say.

The seasonally adjusted annualized sales rate, after dipping below 15 million to 14.9 million in March, rallied to come in at 16.15 million last month, Motor Intelligence said, well above forecasts and April 2022's 14.52 million reading. The pace of sales tallied 16.12 million in January and 15.04 million in February, making April the hottest month since May 2021.

LMC, citing rising inventories and more stable production, raised its forecast for 2023 U.S. sales for the second month in a row and now expects the industry to generate 15.3 million new car and light-truck deliveries this year.

“The U.S. market continues to surprise on the upside, despite the cautious tone that is dominating most views in the industry," said Jeff Schuster, head of forecasting and analysis for LMC Automotive. "Consumers remain resilient and fleet sales appear to be heading toward a more substantial recovery."

U.S. auto sales rose 8.4 percent in the first quarter behind healthy retail demand and robust fleet volume as automakers tackle a backlog of orders from commercial, government and rental customers.

Ford said deliveries rose 3.8 percent in April, with the Ford division up 5.6 percent but Lincoln off 28 percent. The automaker said truck sales increased 21 percent, offsetting an 11 percent decline in crossover and SUV demand. F-Series deliveries jumped 35 percent to nearly 70,000, offsetting lower Ranger and Maverick volume.

Ford Motor's U.S. sales have now increased five straight months year over year. The company said it ended April with gross U.S. car and light-truck stocks of 376,600, down from 405,100 at the end of March.

Strong light-truck deliveries offset weaker car volume at Toyota last month, with the automaker's overall sales rising 0.7 percent to 186,310 on very tight supplies. Sales dipped 2.2 percent at the Toyota division but jumped 22 percent at Lexus.

April was the fourth-straight monthly decline for the Toyota brand. Its core models posted mixed results in April: Corolla, down 32 percent; Camry, up 6.1 percent; Prius, down 29 percent; RAV4, off 9.6 percent; Highlander, down 2.2 percent; and Tacoma, up 20 percent.

Toyota said it ended April with 146,703 cars and light trucks in stock, with most of it at ports or in transit, up from 137,067 a year earlier.

Honda Motor posted its biggest gain since June 2021 with a 25 percent increase in April, with the Honda division up 25 percent and Acura advancing 21 percent. Honda's biggest sellers all posted double-digit gains: The Accord was up 15 percent; the Civic was up 16 percent; and the CR-V was up 77 percent, all on what the company called "stronger inventory of new and refreshed models."  

Dealer inventories at the Honda brand have more than tripled to 38,000 to start May, up from 12,000 a year earlier, while Acura stockpiles more than quadrupled from 5,500 a year earlier to 26,000 today.

Volume rose 15 percent at Hyundai and 16 percent at Kia last month, the companies said Tuesday.

Hyundai's retail sales rose 5 percent to 64,895 in April, with fleet volume of 5,917, representing 8 percent of total deliveries in the month.

Randy Parker, CEO of Hyundai Motor America, cited "high demand for Hyundai product" and "a diverse lineup" of crossovers, pickups and electrified vehicles for the latest results.

“Demand is definitely there in the market, so consumers are being somewhat resilient, but it is becoming more difficult to get contracts done because of rising interest rates," said Parker. "Products have become a lot more expensive, making it more challenging for consumers to afford a car. This is definitely going to be the year of affordability.”

Hyundai said it had 49,045 cars and light trucks in U.S. stock at the end of April, down slightly from 53,119 at the close of March but up sharply from 15,809 at the end of April 2022.

Sales of Kia's electrified vehicles rose 74 percent to 11,798 last month, while utility vehicles accounted for 71 percent of April deliveries.

Kia, with one of the industry's lowest days' supply of new vehicles, as well as a hot streak with retail buyers, continues to prioritize output for dealers while keeping fleet volumes "very modest," said Eric Watson, vice president of sales operations for Kia America.

Genesis also saw sales rise by double digits, with April volume of 5,857, up 16 percent and a record for the month, behind higher deliveries of the GV70 and GV80 as well as the new GV60 EV. Genesis sales have now advanced six consecutive months.

In its first full month on the market, sales of Genesis' Electrified GV70 totaled 161. Genesis Motor North America COO Claudia Marquez expects volume for the model to grow each month the rest of the year, despite its limited availability and loss of eligibility for the $7,500 federal tax credit. Marquez said Genesis, like Hyundai, will lean into leasing to drive EV sales.

Subaru sales advanced for the ninth-straight month, with April volume rising 12 percent to 51,014, even with the brand's two biggest sellers, the Outback and Crosstrek, posting declines.

Sales rose 7.5 percent to 32,351 last month at Mazda, giving the automaker its seventh-straight monthly gain and best April since 1994. The rest of the industry reports U.S. sales on a quarterly basis.

Volvo snapped a 6-month winning streak with a 4.1 percent decline in April volume.

Retail inventory hit approximately 1.2 million vehicles in April, flat with March but 45 percent higher than in April 2022, J.D. Power and LMC Automotive said.

"With the significant improvement in overall new-vehicle availability from a year ago, dealer margins are declining and manufacturer incentive spending is increasing," said Thomas King, head of data and analytics at J.D. Power. "Nevertheless, the demand for vehicles in the retail market remains strong due to pent-up demand from pandemic-related production shortages."

Among brands, Kia, Toyota, Honda, Lexus, Subaru, BMW, Land Rover, Hyundai and Volkswagen had the lowest U.S. supplies last month, Cox Automotive said, while Jeep, Buick, Ram, Chrysler, Infiniti, Jaguar, Dodge and Lincoln had the highest stockpiles.

Higher production, inventory and incentives are being offset by rising affordability concerns, reflecting near-record-high vehicle prices and uncertain consumer confidence, analysts say.

"Auto sales will remain subject to the unsteadiness apparent in the overall economy, with the likelihood of month-to-month volatility ahead," said Chris Hopson, principal analyst at S&P Global Mobility.

"Interest rates on vehicle loans appear to be plateauing as manufacturers offset higher financing costs with increased APR-based relief," said Zack Krelle, an analyst with TrueCar. "Affordability concerns remain and we're seeing demand for lower-priced vehicles, under $30,000, move vehicles off the lot more quickly."

The average new-vehicle retail transaction price in April was expected to reach $46,044, a 2 percent increase from April 2022 but down from the record high of $47,362 set in December, J.D. Power and LMC Automotive said, as rising incentives make an impact. TrueCar estimates transaction prices averaged $45,251 last month, up from $44,018 in April 2022 but down slightly from $45,651 in March.

The average incentive per new vehicle rose an estimated 59 percent to $1,599 last month from April 2022, J.D. Power and LMC said, while incentive spending as a share of sticker price was tracking at 3.3 percent, an increase of 1.1 percentage points from April 2022. TrueCar estimates incentives averaged $1,606 per vehicle last month, up from $1,327 in April 2022 and $1,542 in March, with nearly every major automaker padding discounts month to month and year over year. Just two automakers, Toyota and Honda, saw lower incentives last month compared with April 2022, TrueCar estimates.

The average incentive per new light truck last month was expected to be $1,673, up $644 from April 2022, J.D. Power and LMC Automotive said, and the average incentive on new cars was expected to be $1,328, up $404 from a year earlier.

Fleet deliveries are expected to total 229,100 last month, up 33 percent from April 2022 on a selling day-adjusted basis, J.D. Power and LMC Automotive said, and fleet volume is expected to account for 17 percent of total light-vehicle sales, up from 14 percent a year earlier.

• There were 26 selling days in April vs. 27 in April 2022.
• The average interest rate on a new-vehicle loan was expected to increase to 6.85 percent in April, or 2.27 percentage points higher than a year earlier, J.D. Power and LMC Automotive said.

"Relatively strong sales in the wake of rising interest rates and worsening economic headwinds suggests there remains some pent-up demand. Product availability has improved substantially over this time last year. Dealer lots are no longer empty, so there is far more selection for vehicle shoppers that may have been waiting to buy a particular model or configuration."

— Charlie Chesbrough, Cox Automotive senior economist

Carly Schaffner contributed to this report.