The automotive industry is trying to start the second quarter with its best foot forward on Monday, but sales reports look weak initially. Ford Motor Company's (NYSE:F) total sales declined 7.2% in March, driven by a significant drop in fleet sales compared to the prior year and a 1.5% decrease in retail sales. There were some bright spots in the data, including a spike in F-Series sales, as well as some red flags. Let's take a look at the highlights.

Big vehicles drive big price gains

The first quarter was a satisfactory one for Ford's F-Series truck, plain and simple. Through the first three months of the year, sales of the F-Series are up more than 10% compared to last year's first quarter, and topped 205,000 units. In March alone, the F-Series recorded 81,330 units sold, one of the rare instances when sales were strong enough to top 80,000 in a single month. In addition, a staggering 56% of 2017 Super Duty retail sales were high-end Lariat, King Ranch, and Platinum trims.

Ford's 2018 F-150 at a construction site.

Ford's 2018 F-150. Image source: Ford Motor Company.

"Our high-series Super Duty trucks and all-new F-150 Raptor drove double digit F-Series sales gains in March, along with the strongest year-over-year increase in transaction prices of any truck manufacturer in the industry." Mark LaNeve, vice president of Ford's U.S. Marketing, Sales and Service team, noted in a press release. Ford's average transaction pricing jumped $1,800 during March, compared to the industrywide average increase of only $190. That huge increase was driven in large part by the F-Series, which posted a $2,500 increase in average transaction prices in March.

Fleet, incentive, and inventory trends

Part of the reason for Ford's total decline in sales was its drastic 17% drop in fleet sales. Keep in mind, however, that last year's fleet sales were highly inflated during the first quarter and tapered off to normal levels in the back half of the year, so Ford is up against a tough year-over-year comparison. However, Ford's fleet sales still generated 33% of total sales, which is a bit high -- GM, by comparison, only generated 20% of its March sales from fleet segments.

As the U.S. auto market plateaus, investors should keep an eye on incentive spending needed to move vehicles off dealership lots, as well as on the days' supply of inventory. If supply of vehicles heavily outweighs demand, incentives will spike and eat into automakers' profits. Ford's gross stock, which includes inventory in transit, had 80 days' supply in March, which is roughly flat compared to last year, albeit slightly higher than the preferred 65 to 75 days' supply. Investors would like to see that gross stock trend lower throughout the stronger spring selling season.

Lincoln's strong month

A glance at Lincoln's total sales for March doesn't do its month justice. While Lincoln's total sales were down 1.4% in March compared to the prior year, it recorded its best March retail sales performance in nine years with a 5% gain. Lincoln MKC sales jumped 17% during March, which was its best start to the year since its 2014 launch.

One interesting detail within Lincoln's sales data was that passenger car retail sales were up 11%, while SUVs gained only 2%. That's a complete flip-flop compared to what segments are driving sales in the nonluxury category: Ford's car segment sales were down more than 24% for the year to date. Lincoln sales are up almost 9%, putting it on pace to record a fourth consecutive year of annual gains -- something Lincoln hasn't done in at least two decades.

Ultimately, sales are clearly peaking in the U.S. but will likely remain near historical highs and very healthy levels. One leading indicator investors can watch is consumer confidence, which continues to trend higher, since auto sales and other big-ticket purchases typically remain strong when confidence is high. If they can keep a lid on incentive spending, 2017 should still be a very profitable year for major automakers.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.