Demand for Fuel-Efficiency Drives Up March Auto Sales

April 3, 2011 Updated: October 1, 2015

SELLING FAST: Workers move a 2011 Hyundai Genesis Coupe for display in the showroom at a Hyundai dealership in Glendale, Calif. (Kevork Djansezian/Getty Images)
SELLING FAST: Workers move a 2011 Hyundai Genesis Coupe for display in the showroom at a Hyundai dealership in Glendale, Calif. (Kevork Djansezian/Getty Images)
NEW YORK—U.S. consumers bought more cars in March, as a recovering economy and continued low interest rates pump up demand for new cars.

Industry group Autodata Corp. estimated late last week that auto sales in March totaled more than 1.2 million vehicles, an increase of almost 17 percent from March 2010.

Small, gas-efficient vehicles led the charge, as a surge in gas prices fueled by emerging market demand and unrest in the Middle East have drummed up more demand for gas-sipping cars.

 

Sales Up Across the Board

Sales at Ford Motor Co. totaled 212,777 last month, an increase of 19 percent in March, compared with the same month last year.

“With gasoline prices eclipsing $3.50 a gallon, consumers are placing a high priority on fuel efficiency in every size and kind of vehicle,” said Ken Czubay, Vice President at Ford, in a statement. “Our investment in new products as well as more efficient engines and transmissions” have paid off for the Dearborn, Mich.-based automaker.

Rival General Motors (GM) also experienced a sales jump of 11 percent in March, driven mainly by its new small car, the Chevrolet Cruze which replaced the Cobalt last year. As a result, the company said that each of its four core brands—Cadillac, Chevrolet, GMC, and Buick—gained market share against competitors.

In addition, GM said that its per-car incentives declined by $600 to $800 per vehicle last month, compared to February.

"Our plan was to get out of the gates quickly in the first quarter and we succeeded," said Don Johnson, vice president of U.S. Sales Operations. Johnson also noted a trend in the marketplace—consumers’ “increasing desire for fuel-efficient vehicles.”

Nissan North America said that it enjoyed its best month ever in sales, with 121,141 cars and trucks sold in March. "Nissan enjoyed our best month ever, with the foundation of our fuel-efficient vehicles such as Altima, Sentra and Rogue leading the way," said Al Castignetti, Nissan’s vice president and general manager, in a statement.

U.S. automaker Chrysler Group eclipsed Nissan with sales of 121,730 last month, an increase of 31 percent from last year. The sales figures were the best month for Chrysler since 2008, prior to the onslaught of the recent financial crisis.

A slew of other automakers, including Porsche, Mercedes-Benz, Mitsubishi Motors, and Honda, all recorded higher sales.

Toyota Sales Slump

Toyota Motor Corp., the world’s biggest automaker, experienced an unexpected decrease in sales of 6 percent compared to March of 2010.

The Japanese automaker sold 176,222 units during a time of turmoil for its Japanese business. The earthquake which hit northern Japan on March 11, followed by a massive tsunami and subsequent nuclear crisis have hit Toyota’s operations globally.

In a statement, the automaker said that its main focus currently is to restore operations to normal in its affected areas in Japan.

Toyota’s performance for the quarter nonetheless is impressive—quarterly sales of 433,924 vehicles year to date is 11 percent higher than the first quarter last year.

Japanese Market Fizzles

Sales in Japan—the home market for several major automakers—were a different story.

The natural disasters last month, coupled with the ensuing nuclear scare, deterred automobile buyers. In addition, many factories and assembly plants were shut down as a result of power outages and shortage of parts.

Sales of cars and trucks totaled 279,389 in March in Japan, a decline of 37 percent from the same month in 2010. All major Japanese automakers suffered as a result.

Analysts expect consumer confidence to fall in Japan as the nation braces with a massive recovery effort, while could total in the hundreds of billions of dollars.

Toyota President Akio Toyoda announced on Friday in Japan that he expects Toyota’s bottom line to be negatively affected by the earthquake and ensuing disruptions. He declined to quantify the impact.

Auto Prices on the Rise

Higher demand from consumers and expected shortage of supplies in the near future has caused some automakers to increase prices, experts say.

Overall, new car pricing in March has been unchanged from prior months, but manufacturer and dealer incentives are going away.

"The actual and perceived supply chain problems enabled automakers to lower incentive spending in March with the trend expected to continue into April," said Jesse Toprak, vice president of Industry Trends and Insights for TrueCar.com, an authority on new car pricing. "The Japanese automakers will see a dramatic reduction in incentive spending in the coming months with an increase in transaction price."

On average, customer incentives—including free upgrades, discounts, and other dealer or manufacturer credits to entice customers to make a purchase—fell $366 to $2,432 per vehicle in March, compared to last year.

A smaller supply of new cars due to supply and parts disruptions following the crisis in Japan has driven up prices for used cars nationally. In the period from March 11 to March 28, prices for used mid-size sedans, such as Toyota Camry and Honda Accord, have increased by 8 percent, according to used car research firm NADA.

"The dramatic increase in wholesale vehicle prices indicates that buyers are expecting the supply of small, fuel-efficient cars to dwindle even more because of the crisis in Japan and gas prices that continue to rise," said Jonathan Banks, automotive analyst for the NADA Used Car Guide.

“Unless Japan is able to quickly restore consistent power,” Banks says, prices of used vehicles will continue to rise “during the next three months.”

Two of the biggest automakers—General Motors and Ford—saw their stocks jump last Friday as a result of the good news. Shares of GM increased by 4.4 percent, to $32.41, while shares of Ford increased by 1.7 percent to settle at $15.16.