New Vehicle Sales Remained Strong in March, Despite Turmoil Overseas

Last month’s devastating earthquake and tsunami in Japan combined with continued unrest in the Middle East and higher oil prices had most analysts predicting a downturn in light vehicle sales, but U.S. consumers appeared to be unfazed as sales rose 17 percent compared with March of 2010.

Offsetting concerns about world events were the improving availability of credit, low interest rates, lowering jobless numbers and pent-up consumer demand.

General Motors Company’s domestic sales boss Don Johnson said, “Based on everything we see right now, we don’t see anything significant that’s going to slow down the industry.” GM expects 2011 industry-wide sales to reach between 13 million and 13.5 million units this year.

J.D. Power & Associates’ head automotive industry forecaster Jeff Schuster, however, warns that parts shortages caused by last month’s Japan earthquake and tsunami could lead to lower output at a number of U.S. plants in the weeks to come. Schuster said, “The recovery is on track, but I think there are some potential disruptions ahead of us.”

He also thinks that last month’s sales figures may reflect consumer’s fears of coming inventory shortages. Sales of Toyota’s Prius hybrid surged 52 percent in March, possibly due to concerns that inventories will dwindle in the coming months.

Although higher oil prices have not resulted in a decline in sales, the trend is definitely toward smaller, more fuel efficient vehicles. Small car sales accounted for 29 percent of the market in March, up from 26 percent during the same month in 2010. General Motors and Ford both reported strong sales of small cars like the Chevy Cruze and re-introduced Ford Fiesta.

During a recent conference call with reporters, Ford’s vice president of domestic marketing, sales and service, Ken Czubay, warned that the increasing demand for small vehicles will likely result in inventory shortages. “Most likely lean small-car inventories will be a headwind on the industry’s sales rate as we begin this month,” he said.

Czubay also said that light truck sales have fallen since their strong showing earlier this year.  Although Ford saw a 28 percent increase in truck sales last month, the majority of those sales were to commercial fleet sales operators.  Czubay pointed to higher fuel prices as the reason for declining retail sales.

The decline in demand for larger, less fuel efficient vehicles is prompting Ford to temporarily idle its Louisville, Kentucky truck plant.

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