Auto-Sales Jump in March: Is Recovery Finally Here?

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A row of Toyota Priuses sit on the sales lot at City Toyota in Daly City, Calif.

With help from big incentives from Toyota and broadly stronger demand for vans and pickup trucks, sales of new vehicles leaped nearly 27% in March compared with the same month last year, as the auto industry began to show signs that it is emerging from a long slump.

"Obviously, March was a very good month," says a beaming Don Esmond, Toyota Motor Sales senior vice president, noting that the Japanese automaker, which has been hurt by controversy and car recalls owing to unintended acceleration, increased sales 41% in March. Toyota also gained market share through what Edmunds.com described as "record incentives."

Not only did deal-driven Toyota score big, so did laggards like General Motors, which stayed skimpy on incentives. GM's overall sales were up 21%, but sales increased 43% for its four core brands — Chevrolet, Cadillac, GMC and Buick — that survived the company's bankruptcy.

"We're pretty encouraged by our results. Our incentive spend is down significantly from last year," says Susan Docherty, GM's vice president of marketing, who points out that GM inventories have been cut by half and third shifts have been added at plants in Michigan, Kansas and Ontario to increase production.

Ford Motor Co. increased sales 43%, thanks to a boost from commercial buyers replacing worn out pickup trucks and other vehicles. Overall, Ford's sales increased 37% during the first quarter; the increases posted in February and March were the company's best monthly gains since 1984.

"Our dealers welcome more new customers every day," says Ken Czubay, Ford's vice president of U.S. sales and service.

Chrysler lagged behind, with sales dropping 8%. Yet Fred Diaz, the executive in charge of Chrysler sales, says Jeep vehicles sold briskly and sales of minivans and trucks were steady.

"What we're seeing is the gradual recovery for the industry," says Jim Campbell, domestic marketing chief for GM's Chevrolet division. Along with the sales gains for Toyota, Ford and GM — the new Big Three — Subaru, Nissan, Kia, Hyundai and Audi also saw increases.

Industry analysts see the current gains as more than a flash in the pan. "We think there is a steady recovery under way. We expect it to continue," says Scott Painter, CEO of TrueCar.com, an online car-buying guide. That bullish view is supported by a new round of positive economic signals. While consumer confidence remains shaky, underlying economic indexes, such as freight-car loadings and oil-rig counts, show that the overall economic picture is improving.

Nevertheless, analysts are cautious about calling a definite end to the industry's long dry spell. "April is typically a slower sales month than March, and we're already getting signals that some automakers will extend their incentives," notes Edmunds analyst Jessica Caldwell. Moreover, despite the big gains reported by many automakers for March, the seasonally adjusted rate of auto sales came in at about 12 million units, a bit less than the more-optimistic forecasts.

A longer-term worry is that the Great Recession seems to have put a crimp in Americans' long-standing love affair with the automobile. R. L. Polk & Co., of Southfield, Mich., reported this week that the number of cars and light trucks scrapped in the 15 months from July 1, 2008, to Sept. 30, 2009, "substantially outnumbered" new vehicle registrations. Polk's tally for the 15-month period shows that 14.8 million vehicles were scrapped, while registrations of new vehicles totaled 13.6 million. That suggests that families may be downsizing from three cars to two or even fewer and escaping the annual car taxes, insurance and maintenance costs of unneeded clunkers. Such a frugal mind-set could take the edge off any recovery.