April auto sales defy economic uncertainty

The spending frenzy on new cars and trucks in March spilled into April as consumers overcame higher interest rates and tightening credit to take advantage of more plentiful inventory and rising incentives. Fleet deliveries also boosted April sales.

While first-quarter sales gave the industry reason to be encouraged, the April results were "comfortably the most impressive outcome since 2021," said David Oakley, who oversees forecasting in the Americas for LMC Automotive.

"As the market appears to be finally moving beyond supply chain woes, and pricing begins to become slightly more favorable to the consumer, thanks to higher incentives, we are now seeing sales comparable to pre-pandemic levels," he said.

Light-vehicle sales in April totaled 1.36 million, an increase of 10 percent over April 2022, according to LMC Automotive data. That figure includes numbers from automakers that won't publicly report sales until the end of the second quarter.

For the seven automakers that do report on a monthly basis, sales increased 8.9 percent, according to the Automotive News Research & Data Center.

Similar to March, fleet sales played a key role in April's strong performance, representing 21.7 percent of total volume, the highest share since the pandemic, LMC said.

Retail sales still saw a 3.8 percent annual gain, according to estimates from True Car.

Motor Intelligence estimated that April's seasonally adjusted annualized sales rate landed at 16.15 million, the highest this year since January's rate of 16.12 million.

Oakley said April light-vehicle sales came in 6 percent higher than expectations, and as a result, LMC revised its outlook for 2023 upward by 175,000 vehicles to 15.3 million.

Average transaction prices are still elevated but are starting to see some pressure from rising incentives, which increased 4.1 percent from March to $1,606 per vehicle across all automakers, according to TrueCar data. The industry average transaction price came down 0.9 percent from March to $45,251.

But compared with April 2022, average incentive spending jumped 21 percent; the average transaction price was up 2.8 percent.

Retail inventory stood at 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.

Thomas King, J.D. Power's head of data and analytics, said "significant improvement in overall new-vehicle availability from a year ago" is suppressing dealer margins and causing automaker incentive spending to increase.

"Nevertheless, the demand for vehicles in the retail market remains strong due to pent-up demand from pandemic-related production shortages," King said.

Said Zack Krelle, an analyst with TrueCar: "Interest rates on vehicle loans appear to be plateauing as manufacturers offset higher financing costs with increased APR-based relief."

Despite shopping activity, affordability remains a concern. Chris Hopson, principal analyst at S&P Global Mobility, said the "unsteadiness" in the economy will be reflected in auto sales, and volatility is likely in the coming months.

Honda Motor Co., Hyundai Motor, Kia America and Subaru all posted double-digit gains and managed to maintain discipline with April incentive spending well below the industry average.

Honda posted its biggest gain since June 2021 with a 25 percent increase in April. Honda Division rose 25 percent, and Acura advanced 21 percent. The automaker has been slower to rebuild dealership stockpiles but cited stronger inventory of redesigned and freshened models, including the Accord, CR-V and Pilot.

Hyundai and Kia both posted gains for the ninth-straight month. Compared with April 2022, Hyundai sales were up 15 percent between its Hyundai and Genesis brands, and Kia sales also were up 15 percent, according to the Automotive News Data & Research Center.

"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 Hyundai Motor America CEO Randy 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," Parker said.

Kia sales chief Eric Watson said Kia will be able to maintain a lower incentive spend than other brands thanks to fleet mix control as well as flexible production during the pandemic.

Both Hyundai and Kia say they will continue to focus on keeping dealers flush with inventory.

"We're trying to strike a very healthy balance between maintaining focus on retail and supporting our dealer network and maintaining our relationship with our commercial and fleet accounts," Hyundai's Parker said.

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

Mazda sales were up 7.5 percent, marking the automaker's seventh- straight monthly gain and best April since 1994.

After three months of declines, Toyota eked out an increase of 0.7 percent. Toyota Division sales were off 2.2 percent, while Lexus increased 22 percent.

Ford deliveries rose 3.8 percent last month. Ford Division rose 5.6 percent, but Lincoln was off 28 percent.

Ford's incentive spending reached $1,496, a 7.5 percent increase from the previous month, and the company warned during its earnings call last week that "higher industrywide customer incentives as vehicle supply and demand rebalances" would be a "headwind" for profitability.