Automakers are still struggling to gain momentum, as February auto sales remained essentially flat.
Unlike last month’s overly optimistic forecast, the 15.34 annualized sales rate came in line with economist estimates polled by Bloomberg. Top manufacturers such as General Motors (GM), Ford (FM) and Toyota all reported a slowdown in sales– attributing inclement weather for the slump.
Volvo suffered the steepest decline in year-over-year gains. While industry executives are poised for stronger sales in 2014, auto analysts aren’t ready to sign on to the optimism.
“We’ve been dealing with a harsh weather since December,” said Douglas Porter, chief economist for BMO Capital Markets. “It’s a legitimate excuse now, but it’s going to wear thin as the months start warming up.”
Companies with the biggest declines all blamed Mother Nature. Only one of the US top car manufacturers reported gains. Chrysler came out on top after selling 154,866 vehicles, an 11 percent increase in sales compared to a year ago. Truck sales led the way with a 27% gain– the company’s Jeep Cherokee and Ram were among the best selling brands. Nissan saw a 16 percent increase with 115,360 vehicles sold.
TD Securities economist, Millan Mulraine said the double-digit gains are because of under performing early months’ last year.
“Chrysler and Nissan were laggers. They are enjoying more of the gains because they are catching up,” Mulraine said. “All car sales have been weaker across the board because potential buyers are not going to the showrooms.”
Dealerships are intent on luring consumers back into showrooms with attractive incentives. General Motors Co. began on Presidents Day when they launched hefty discounts on one of its popular pick-ups. Competitors responded by marking down prices for top model brands, as well as stocking up on inventories.
Fleet production is up along with inventory supply. Companies will be compelled to offer low annual percentage rates (APR) and generous cash rebates to recoup the downturn in sales as temperatures start to rise.
“Automakers have shown a lot more disciplined on the incentive side to make sure production didn’t get out of control,” Porter said. “We will definitely see more aggressive discounts over the spring, but they’ll have to be maintained.”
Personal income rose in tandem with consumer spending, which is at 0.4 percent, the highest its been in three years. Analysts say more demand will come from low-interest rates, alluring lease deals and banks issuing long-term loans because of stronger consumer credit.
“Credit is getting better and banks are lending more to consumers,” said Scott Brown, chief economist at Raymond James Ltd. “That’s going to be a driving factor in the sales rate.”
Housing starts and retail sales took a hit because of bad weather also. Those sectors, in addition to several underlying factors will determine how much the automotive industry will regain from its winter loss.