Toyota Recalls Slowed U.S. Auto Sales Recovery in February

Although U.S. auto sales for February are expected to be higher than a year ago, the fallout from Toyota’s recall troubles likely kept some consumers on the sidelines and out of dealer showrooms according to J.D Power & Associates.

A report released by the industry forecaster predicts that light vehicle sales in the U.S. will show an 8% increase, to 741,500 units for the month for a seasonally adjusted annualized of about 9.9 million vehicles.

Although the estimate shows improvement over last year’s annual U.S. sales of just 9.1 million units, it is down from January’s 10.8 million annual projection.

J.D Power executive director of global forecasting, Jeff Schuster, said, “While February sales have improved from a year ago, the pace of the recovery has hit a speed bump.”

He said that the speed bump in the recovery was caused by a variety of factors including consumers waiting out the Toyota recalls and winter storms impacting showroom traffic, and added, the effects of these external factors are likely temporary and the recovery is expected to get back on track.”

The slump is not surprising considering Toyota temporarily halted sales of some of its best-selling models earlier in the month. The company said it expects most of the 131,000 recalled vehicles in its U.S. inventory to be back on dealer lots by the end of February.

J.D. Power’s 2010 U.S. auto sales forecast has been raised from 11.5 million units to 11.7 units on stronger-than-expected economic numbers reported during the fourth quarter and increased liquidity in credit markets. In 2009, U.S. auto sales reached a 27-year low of only 10.4 million units.

Production volume is also expected to increase by 24% to 10.6 million units – up from 8.5 million units in 2009.

Schuster also said that dealer inventories have declined significantly from last year’s levels. In the last four months, he said automakers have begun replenishing their depleted stocks. He warned that the ramped up production could lead to a short term glut resulting from February’s slow sales pace.

Still, inventories are at a much healthier level than February of 2009 when they averaged 121 days “ over double the generally accepted optimal 60-day supply. Schuster said the current supply is estimated at 71 days.

In conclusion, Shuster warned, The recovery in production levels is more pronounced than the recovery in demand after the extensive production cuts in 2009, adding concern of further inventory troubles throughout the year.”

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