Three Big Red Flags For Auto Sales

In March, auto sales unexpectedly declined  5.7%.  Forecasts now suggest April will mark the fourth straight monthly decline in U.S. vehicle sales.

Not to worry, Detroit Auto Makers Are Upbeat as Sales Volumes Stall.

Industry observers say they don’t expect a collapse in sales, even if demand drifts below record levels hit last year. “Total sales are still strong from a historical perspective and the decline is very gradual,” said Jessica Caldwell, an analyst at Edmunds.com, an auto-research firm and car-shopping website. “It shouldn’t really be seen as alarming.”

Auto makers say they’ll stay disciplined and trim production levels to reflect weaker demand instead of cutting prices to keep their factories humming.

Concern about rising spending by auto makers to maintain sales growth may be overblown, Barclays Capital said in a recent research note. Industry incentives as a percentage of average transaction prices came to 11.2% in the first half of April, the lowest level since June, the brokerage said. “A big driver of the improvement is GM, which is pulling back on incentives despite elevated inventories,” it said.

GM finance chief Chuck Stevens told analysts the company built up stocks of some SUV models ahead of scheduled down time at several factories this summer and fall, and said inventory will return to normal later in the year. He said that even with more discounts, price levels remain healthy.

“It’s not like we’re sitting and waiting for a downturn,” Mr. Stevens said. “Day to day, we’re very focused on acting like we’re in a downturn” by cutting costs and trimming vehicle production to meet demand, he said.

Red Flags for Retailers

Automotive News cites Red Flags for Retailers while asking 17 million or bust?