Automakers are due to report U.S. sales of new cars Tuesday, and analysts expect the industry to report another solid month.
Most of the world’s Big 8 automakers are likely to report an increase in demand for their cars, trucks and SUVs in April, auto industry analysts say, but Nissan and Honda are expected to have ruled the roost last month with double-digit growth in U.S. sales compared to the same month last year, their gains driven by strong demand for popular sedans.
Despite an expected decline for General Motors, the Detroit automaker is likely to regain its usual top spot after Ford Motor eked out a March gain over the maker of Chevrolets and Cadillacs by a slight 900 units. The gain was temporary, however, attributed to a big rise in Ford bulk deliveries to corporate customers, known as fleet sales.
April could see a return to the strong sales pace of the 10 months prior to March, when sales hit a 13-month low. But there are increasing signs that the industry is reaching a plateau.
Americans continue to overextend themselves by taking on long financing terms, as much as 84 months (seven years) and well beyond the three-to-four-year terms most financial advisers recommend. According to J.D. Power and Associates, more than a third of existing car loans are financed at 72 months (six years), increasing the chances of buyers winding up owing more than their cars are worth down the road.
J.D. Power also expects the number of people who own financed cars that are worth less than what they owe to hit a 10-year high in 2016. And Fitch Ratings, a credit ratings company, reported earlier this year that subprime auto loans that were delinquent more than 60 days rose above 5 percent for the first time in nearly 20 years.
But for the time being, cheap credit fostered by the Fed’s monetary policy is helping to fuel a record sales spurt in the U.S. Forecasts maintain a 2016 estimate of 17.4 million unit sales for 2016, up from 17.1 million last year and the highest since 2000, for a record seventh consecutive year of growth.
In April, GM is seen recovering its No. 1 position over Ford by more than 30,000 units on robust demand for its trucks and SUVs, according to a forecast from Edmunds.com. But GM and Volkswagen are expected to see between 2 percent and 3 percent drop in sales compared to the previous April.
For the rest of the major automakers, April probably will mark a recovery from a weak March. A Thomson Reuters poll of 30 analysts forecasts a seasonally adjusted annualized rate of 17.3 million units in April, up from 16.6 million in March and considerably higher than the 16.8 million in April 2015, which benefited from an extra selling day compared to this year. (The seasonally adjusted annualized rate, or SAAR, is a key monthly metric that measures a 12-month average adjusted for seasonal fluctuations.) Edmunds.com and Kelley Blue Book both expect about 1.51 million new-vehicle sales in April.
“Following a disappointing March, we expect sales to get back on track in April with SAAR in the mid-17 million range,” Tim Fleming, analyst for Kelley Blue Book, said in an email. “Increased fleet sales and rising incentive spending among automakers remain the factors to watch, but retail demand appears to be holding steady, signaling the industry’s strong run isn’t over quite yet.”
The long-term migration of American preferences away from sedans toward crossovers (small-engine SUVs typically built on car platforms) hasn’t hurt Honda and Nissan, which could see growth of as much as 13 percent on robust demand for Honda’s Civic and Accord and Nissan’s Altima and Maxima, as well as their strong offers in the small SUV segment (the Honda CR-V and Nissan Rogue).
But other automakers are struggling to unload many of their sedans and have been boosting incentives to cut inventories. Fiat Chrysler Automobiles announced recently it would soon suspend (if not discontinue) production of the Chrysler 200 and Dodge Dart.
The Volkswagen brand continues to suffer from its diesel-emissions scandal, with sales expected to fall about 3 percent. As usual, Ford and GM will report strong growth in pickup trucks sales to compensate for declines in sedans.