Fleet drives market gains; GM, Ford advance; Toyota, Stellantis slip

U.S. sales at General Motors and Ford Motor Co. rose in the first quarter and Toyota Motor Corp.'s deliveries declined for a third straight month, as inventories steadily recover from a microchip shortage and discounts, while still low, rise across much of the industry.

The overall market rose 8.6 percent to 1.37 million cars and light trucks in March, the highest monthly tally since May 2021, LMC Autmotive estimated, and slightly above the range of forecasts from analysts.

The seasonally adjusted, annualized rate of sales in March also came in higher than forecasts -- 13.8 million to 14.7 million -- at 14.9 million, Motor Intelligence said. The latest sales pace is well above the 13.67 million recorded in March 2022, but is down from January (16.21 million) and February (15.19 million), signaling the market may be losing traction as the spring selling season gets underway.

Volume is being driven mostly by stronger fleet, light-truck shipments and stable retail deliveries, even as higher interest rates and MSRPs, falling used-vehicle prices and tightening credit conditions sideline some new-car shoppers.

Fleet sales tallied 280,000 in March, higher than forecasts, LMC Automotive said in a preliminary report, and accounted for 20 percent of industry volume, the highest mix since the pandemic unfolded, and up from 15 percent in March 2022. Retail volume totaled 1.09 million last month, LMC said.

GM said first-quarter sales rose 18 percent to nearly 600,000, with volume up 16 percent at Chevrolet, 7.6 percent at GMC, 99 percent at Buick and 29 percent at Cadillac. Overall, U.S. retail sales rose 15 percent and fleet volume, representing 25 percent of deliveries, jumped 27 percent last quarter, GM reported. It was the third straight quarter of strong growth for the company.

The automaker said it ended the first quarter with 412,285 cars and light trucks in dealer stock or in transit, unchanged from the end of the fourth quarter.

Ford rebounded from a fourth-quarter 2022 decline with sales rising 10 percent in the latest three-month period, with Ford division volume rising 11 percent but Lincoln down 1.1 percent. The first-quarter tally was driven by a 20 percent jump in pickup sales and a slight gain in SUV volume.

In March, Ford's sales advanced for the fourth straight month, rising 7.5 percent, with the Ford division up 8.2 ercent but Lincoln down 6.9 percent.

Ford ended March with gross stocks of about 400,000 cars and light trucks, with 251,000 units in dealer stock on the ground and down slightly from 254,000 at the close of February.

Toyota, saddled with some of the industry's lowest stockpiles, said March sales dipped 9.1 percent, with the Toyota division off 12 percent and Lexus advancing 12 percent.

GM easily outsold Toyota by nearly 130,000 units during the first three months.

Toyota, which fell to No. 3 in the quarter behind GM and Ford, said it ended March with 142,958 cars and light trucks in stock, with 116,108 of those units at port or in transit, equal to a 22-day supply. The Toyota division had 112,420 vehicles in inventory and Lexus had 30,538 cars and light trucks to start April, a spokesman said.

Stellantis' slump continued with first quarter sales sliding 9 percent, behind a drop of 20 percent at Jeep and 7 percent at Ram, with volume up at two much smaller divisions, Dodge and Chrysler. The company, with some of the industry's highest inventory levels along with rising incentives, has seen U.S. sales decline seven consecutive quarters. 

“As we continue to navigate the market conditions transpiring across the automotive industry, together with our dealer network, we are making the necessary adjustments to meet our customer’s expectations,” said Jeff Kommor, head of U.S. sales at Stellantis.

Honda Motor Co.'s U.S. sales also rebounded, and Hyundai and Kia racked up more gains in March, setting records for the month.

Sales advanced 8 percent at American Honda last month, with deliveries up 8.8 percent at the Honda division and 2.6 percent at Acura. It was the automaker's second gain of the year after a 1.4 percent decline in February and 14 percent rise in January.

American Honda has been among the automakers most impacted by tight chip supplies, mostly sourced from inland China. The Honda brand ended March with 38,000 cars and light trucks in stock, a spokesman said, while Acura had 22,000 units on hand, with both figures up over the end of February and up sharply from a year earlier.

Nissan, behind strong light-truck deliveries, snapped a stretch of six straight quarterly declines with a 17 percent increase in the first quarter, with the Nissan division advancing 16 percent and Infiniti surging 40 percent.

Volume rose 27 percent to 75,404 last month at Hyundai, with retail deliveries increasing 15 percent to 68,312. Hyundai said sales to fleet customers represented 9.4 percent of March volume.

The company ended March with 53,119 cars and light trucks in U.S. inventory, down slightly from 54,156 at the close of February but up from 17,271 a year earlier.

U.S. sales advanced 20 percent to 71,294 at Kia, its fifth-straight month of a gain of 20 percent or more.

Kia said four models — Carnival, Sportage, Telluride and Forte — set March records while sales of electrified models increased 10 percent, even as deliveries of the EV6 slumped 69 percent to 988 from 3,156 a year earlier.

Kia has one of the lowest days-supply of vehicles across the industry and said production and availability of key utility vehicles and "in-demand" electrified vehicles will improve "throughout the year.”

Subaru sales jumped 23 percent to 32,213 on strong light-truck deliveries.

Hyundai, Kia and Subaru have now posted higher sales eight consecutive months, the longest streaks among mass-market brands in the U.S.

March volume rose 5.3 percent at Mazda.

It was a strong quarter for other luxury brands as well, with Tesla, BMW, Audi Porsche and Volvo posting double-digit gains. Genesis set a monthly U.S. sales record with volume of 5,656, up 23 percent, its fifth straight gain, on higher crossover deliveries.

Mercedes-Benz was an exception to the gains at luxury brands, with first-quarter volume dropping 1.2 percent to 61,531.

"Retail demand for vehicles remains strong, due primarily to considerable pent-up demand," said Thomas King, president of the data and analytics division at J.D. Power. "The availability of new vehicles in inventory at retailers is improving, resulting in a softening of dealer margins and increased manufacturer incentive spending. But, overall, the industry remains supply constrained, and profitability is well above historical norms."

Chris Hopson, principal analyst at S&P Global Mobility, said retail demand — while somewhat muted — reflects "consumers willing, ready, and able" to buy a new vehicle and continue to do so, even in light of rising interest rates and high price levels.

"The specter of further hikes in interest rates, and acceptance of current unsettled economic conditions, may be providing impetus for those considering purchasing a new vehicle," Hopson added.

Showroom traffic and purchase intent remains strong, according to Brad Audet, chief marketing officer for Mazda North American Operations, but higher interest rates, rising monthly loan payments and down payments are challenging conversion rates.

"The industry, as a whole, has an affordability problem right now," Audet said.

Incentives remain low, reflecting tight supplies and demand, but are on the rise across much of the industry.

Average incentive spending per new vehicle last month was expected to reach $1,558, up 45 percent from $1,073 in March 2022, J.D. Power and LMC Automotive estimate, while discount spending as a percentage of the average MSRP is expected to increase to 3.3 percent, up 0.9 percentage points from March 2022.

TrueCar also pegged average March discount spending at $1,558 per new car and light truck, with major increases at nearly every automaker. (See charts above and below.)

To counter higher consumer interest rates at banks and credit unions for new-vehicle loans -- which averaged 6.66 percent in March, or 228 basis points higher than a year earlier, J.D. Power said -- some automakers are offering finance terms as low as 0.9 percent to 4.9 percent, and delaying payments for 90 days as an enticement to purchase.

New-vehicle inventory hovered around 1.82 million in the middle of March, up by 755,000 units from March 2022, but remains tight, Cox Automotive said, though stockpiles vary widely across brands and segments. Toyota, Lexus, Kia, Honda, Hyundai, Subaru and Land Rover continue to have some of the tightest supplies, while Chrysler, Jeep, Buick, Dodge, Alfa Romeo and Volvo have some of the highest stockpiles, according Cox Automotive.

With healthy demand, tight inventories and low incentives, new-vehicle transaction prices continue to rise, with the average price reaching a March record of $45,818, up 3.5 percent from a year earlier, J.D. Power and LMC Automiotive said. TrueCar estimates average transaction prices were $45,397 last month, flat with February, but up 5.6 percent over March 2022.

U.S. auto sales are forecast to rise to 14.2 million to 15 million in 2023, up from 13.85 million in 2022, with major gains expected in the second half as inventories continue to rebound. Cox Automotive and S&P Global Mobility, citing the strong sales pace in January and February, have raised their 2023 forecasts slightly.

"We lost some momentum in March," said Cox Automotive Chief Economist Charles Chesbrough. "The big unknown is what automakers do to offset the challenges facing the consumer and buyers today."

• There were 27 selling days in March, unchanged from a year earlier.
• With inventory rebounding, new vehicles sat longer on dealer lots in the first quarter. Edmunds said the average days to turn for new vehicles climbed to 34 days in the first quarter, compared with 24 days in the first quarter of 2022.
• The average trade-in age of vehicles toward new car purchases increased slightly, climbing to 5.9 years in the first quarter compared to 5.3 years in the first three months of 2022 and 6.4 years for Q1 2015 to 2019.
• The average incentive spending per unit on trucksand SUVs in March is expected to be $1,627, up $545 from a year earlier, while the average spending on cars is expected to be $1,302, up $26 from a year earlier, J.D. Power and LMC Automotive said.

“The stronger start to 2023 has led us to make positive revisions to our vehicle sales forecasts, but we continue to believe supply constraints and affordability issues will put a ceiling on what’s possible in the year ahead. With the job market still strong, the largest demand problem for automotive in 2023 will be rising interest rates that push many would-be buyers out of the market.”

— Cox Automotive Chief Economist Jonathan Smoke

"Consumers are facing credit uncertainty as rapidly rising interest rates have created barriers to entry for even the most qualified buyers. As more consumers sit out of the market, we can expect to see pent-up demand grow even further."

— Jessica Caldwell, executive director of industry insights at Edmunds