Car sales catch fire in March

LOS ANGELES — March is turning out to be a torrid month for auto sales.

Several projections place the annual sales rate at 12 million to 13 million, which would be 20 percent to 30 percent above the pace of the first two months of the year.

Retail sales have taken off, in part because of the steep sales incentives Toyota Motor Corp. is using to regain market share lost to its recent large recalls and subsequent dip in quality and reliability perceptions.

Better credit availability and improved weather this month also is helping sales, analysts said. Automakers are also starting to log big gains in fleet sales as corporations look for more fuel efficient vehicles for their sales staff and the rental car market starts to rebound.

This isn’t all good news.

“There is some risk that the incentives offered by Toyota could spark an incentive war among several automakers,” said Jeff Schuster, executive director of global forecasting at J.D. Power and Associates, the auto market research company. “While this may lead to a temporary increase in sales momentum, it could also potentially slow the pace of long-term recovery.”

Analysts at auto information company also are watching the sales surge with a touch of trepidation.

“We shouldn’t view this as a sign that the economy recovering; this sales bounce is driven by incentives. Take away the incentives, and the sales will slow dramatically,” said Jeremy Anwyl, chief executive of

Toyota, Ford Motor Co. and Hyundai Motor America have among the most robust sales gains so far this month, said David Cutting, a J.D. Power analyst. Chrysler Group, in part because of a dearth of new models, may be the only automaker that doesn’t experience a bounce this month, he said.

While the incentives have pulled average vehicle prices below what dealers were getting in February, the typical transaction is still about 6 percent above 2009 on a year-to-year basis, he said. So with the exception of Toyota, the March incentive war should not cut too deeply into automaker profits, Cutting said.

“It is going to hurt Toyota because they don’t usually do this,” he said.

The round of incentives is set to run through the first week of April.

The industry is expected to sell about 11.5 million vehicles this year. Although that’s up about 10 percent from 2009, it is still well below the 16 million to 17 million a year that the automakers posted for much of the past decade. Total industry sales reached 780,265 in February, up 13 percent from the recession-plagued 688,945 of February 2009. Year to date, sales are up about 10 percent through the first two months of the year.

There is still a huge oversupply of auto factories in the United States, and more plants will have to be closed barring some unexpected huge jump in sales.

“Since 2006, more than 1.2 million units of excess capacity has been cut from North American production levels,” said Schuster. “Capacity is now at 17.9 million units, which is still well above current and near-term production levels of 10.6 million units, suggesting that additional production cuts may be necessary as a new, leaner industry takes shape.”

Talk to us

More in Herald Business Journal

Members of Gravitics' team and U.S. Rep. Rick Larsen stand in front of a mockup of a space module interior on Thursday, August 17, 2023 at Gravitics' Marysville facility. Left to right: Mark Tiner, government affairs representative; Jiral Shah, business development; U.S. Rep. Rick Larsen; Mike DeRosa, marketing; Scott Macklin, lead engineer. (Gravitics.)
Marysville startup prepares for space — the financial frontier

Gravitics is building space station module prototypes to one day house space travelers and researchers.

Orca Mobility designer Mike Lowell, left, and CEO Bill Messing at their office on Wednesday, Aug. 16, 2023 in Granite Falls, Washington. (Olivia Vanni / The Herald)
Could a Granite Falls startup’s three-wheeler revolutionize delivery?

Orca Mobility’s battery-powered, three-wheel truck is built on a motorcycle frame. Now, they aim to make it self-driving.

Catherine Robinweiler leads the class during a lab session at Edmonds College on April 29, 2021. (Kevin Clark / The Herald)
Grant aids apprenticeship program in Mukilteo and elsewhere

A $5.6 million U.S. Department of Labor grant will boost apprenticeships for special education teachers and nurses.

Peoples Bank is placing piggy banks with $30 around Washington starting Aug. 1.
(Peoples Bank)
Peoples Bank grant program seeks proposals from nonprofits

Peoples Bank offers up to $35,000 in Impact Grants aimed at helping communities. Applications due Sept. 15.

Workers build the first all-electric commuter plane, the Eviation Alice, at Eviation's plant on Wednesday, Sept. 8, 2021 in Arlington, Washington.  (Andy Bronson / The Herald)
Arlington’s Eviation selects Seattle firm to configure production plane

TLG Aerospace chosen to configure Eviation Aircraft’s all-electric commuter plane for mass production.

Jim Simpson leans on Blue Ray III, one of his designs, in his shop on Friday, August 25, 2023, in Clinton, Washington. (Ryan Berry / The Herald)
Whidbey Island master mechanic building dream car from “Speed Racer”

Jim Simpson, 68, of Clinton, is using his knowledge of sports cars to assemble his own Mach Five.

Inside the new Boeing 737 simulator at Simulation Flight in Mukilteo, Washington on Wednesday, Sept. 20, 2023. (Annie Barker / The Herald)
New Boeing 737 simulator takes ‘flight’ in Mukilteo

Pilots can test their flying skills or up their game at Simulation Flight in Mukilteo.

An Amazon worker transfers and organizes items at the new PAE2 Amazon Fulfillment Center on Thursday, Sept. 14, 2023, in Arlington, Washington. (Ryan Berry / The Herald)
Amazon cuts ribbon on colossal $355M fulfillment center in Arlington

At 2.8 million square feet, the facility is the largest of its kind in Washington. It can hold 40 million “units” of inventory.

A computer rendering of the North Creek Commerce Center industrial park in development at 18712 Bothell-Everett Highway. (Kidder Mathews)
Developer breaks ground on new Bothell industrial park

The North Creek Commerce Center on Bothell Everett Highway will provide warehouse and office space in three buildings.

Dan Bates / The Herald
Funko president, Brian Mariotti is excited about the growth that has led his company to need a 62,000 square foot facility in Lynnwood.
Photo Taken: 102312
Former Funko CEO resigns from the Everett company

Brian Mariotti resigned Sept. 1, six weeks after announcing he was taking a six-month sabbatical from the company.

Cash is used for a purchase at Molly Moon's Ice Cream in Edmonds, Washington on Wednesday, Aug. 30, 2023. (Annie Barker / The Herald)
Paper or plastic? Snohomish County may require businesses to take cash

County Council member Nate Nehring proposed an ordinance to ban cashless sales under $200. He hopes cities will follow suit.

A crowd begins to form before a large reception for the opening of Fisherman Jack’s at the Port of Everett on Wednesday, August 30, 2023, in Everett, Washington. (Ryan Berry / The Herald)
Seafood with a view: Fisherman Jack’s opens at Port of Everett

“The port is booming!” The new restaurant is the first to open on “restaurant row” at the port’s Waterfront Place.