What's behind best April for Detroit's Big 3 since 2007?
Detroit's Big 3 posted robust gains, led by Ford's popular F-Series pickup brand, GM's Silverado and Sierra cargo trucks, and Chrysler's Ram pickups. Moreover, with incentives down, profits are up.
Full-size pickup trucks drove the Detroit 3 to their best April vehicle-sales numbers since 2007.
General Motors, Ford, and Chrysler all posted double-digit sales increases compared with the same month last year. Ford posted the greatest sales gain, 18 percent, largely crediting the sales of its popular F-Series pickup brand, which increased 24 percent in April, selling more than 59,000 units.
The F-Series pickup has been the best-selling vehicle in the US for 31 years.
GM and Chrysler posted sales increases of about 11 percent each. GM reported a 28 percent gain of its Silverado brand, while its Sierra truck brand jumped 12.8 percent. Sales of Chrysler’s Ram pickup truck increased 49 percent from last April, helping make it the best April for the company since 2007. The
Trucks are typically sold at higher price points than cars; profits this season are also coming from an overall decline in incentives, which means that companies are turning a higher profit. Total industry incentives dropped 3 percent in April from the previous month; Ford and GM spent less on incentives, 7 and 4 percent respectively, while Chrysler incentive spending increased 3 percent.
“What people are actually paying for trucks is actually higher than last month. More people that need to buy trucks are buying trucks and they are not buying on discount,” says Jessica Caldwell, a senior analyst with Edmunds.com. “The fact that prices are not only holding, but getting a little higher on trucks is good news for the domestic car companies because it helps with their profits.
Overall, total light vehicle sale totals are expected at 1.28 million in April, a 9 percent increase from the same month last year, but down 11.5 percent from March. Analysts say they expect year-end sales to end up between 15 and 15.5 million units.
Ms. Caldwell explains that April is considered a “weird” month in the automotive industry because it is sandwiched between March, usually considered a robust sales month as it kicks off spring, and May, which benefits from the Memorial Day holiday and the start of summer – factors that generally drive people to car showrooms.
A convergence of factors is helping drive sales early this year: Improved consumer confidence, which rose to 68.1 from 61.0 in March, rising home prices, continued pent-up demand from last year, and low financing rates.
“These wealth effects have spurred consumer spending this year, including on car sales,” says Lacey Plache, chief economist for Edmunds.com. “Even as tough fiscal issues at home and abroad continue to crop up, consumers have not been derailed.
Leading foreign automaker Toyota reported sales fell 1.1 percent in April compared with the same month last year. Bill Fay, Toyota’s group vice president and general manager, released a statement saying that “continued retail sales growth indicates the underlying strength of the market, which is a great sign for the month ahead.
Honda sales increased 7.4 percent, largely due to its CR-V utility vehicle, which hit an all-time April sales record. Hyundai sales increased 2 percent. Nissan Motor Co. reported the largest sales increase for a foreign automaker at 23 percent.
Volkswagen tallied the largest decline for any automaker in April. The company’s 10 percent decrease in sales compared with the same month last year is partially blamed on the fact the company does not have a large truck brand in its portfolio, plus its Passat brand has failed to remain competitive with best-selling midsize brands, the Honda Accord, Ford Fusion and Toyota Camry. The April decline broke the Volkswagen’s 31-month string of year-over-year growth.
“While it was a challenging month, particularly in the compact and midsize sedan segments, we remain solidly focused on our long-term growth strategy,” said Volkswagen Group of America CEO Jonathan Browning.