The U.S. auto industry registered a better-than-expected performance for the month of May. Sales, pricing, and the SAAR (seasonally adjusted annual rate) all came in strong for the third consecutive month after cold and snowy weather pressured sales in the first quarter.

While May has historically been a strong month for auto sales, as buyers spend their tax returns and think ahead to summer road trips, the five sunny weekends of May 2014 provided an extra boost this year. According to automakers, sales for the last weekend were particularly strong. 

The automakers reported higher-than-expected U.S. new car sales of 1.6 million, the strongest annual sales rate since before the 2008 crisis . The light vehicle SAAR for May came in at 16.8 million vehicles against the consensus estimate of 16.1 million vehicles. Vehicle sales rose by ~11.3% (approx. 1,606,264), with rising consumer demand underpinning a broader recovery in the country's economy.

Moreover, transaction prices also remained strong and discounts didn't increase. The U.S. light vehicle market, with healthy inventories, incentives, and pricing levels, is operating at its full potential. The overall inventory-days supply stood at 59 at the end of May , with overall incentives relatively flat year on year, and average transaction prices were up more than 2% (to approximately $32,307 for a new vehicle), which indicates increased industrial profitability.

Almost every major auto company blew away expectations by wide margins. The sales of General Motors (NYSE:GM) grew by 13% , while the market had expected only 6.4% sales growth, Chrysler's sales surged by 17% while the market had expected an 14% increase , the sales of Toyota (NYSE:TM) increased by 12.6% , and finally the sales of Ford (NYSE:F) climbed by approximately 3% versus a 0.2% decline expected for the month. 

General Motors
General Motors, which had been in the news for all the wrong reasons lately, unexpectedly gained market share and this should help ease investors' concerns. Investors were concerned about whether General Motors could hold onto its market share in the wake of continued recalls, especially considering that some of the more recent recalls extended to currently marketed models.

Despite all of these challenges, General Motors managed to increase its sales by 13% to 284,694 vehicles. The company's market share was 17.7% in May, an increase of 20 basis points year-over-year. All four GM brands -- Buick, Chevrolet, Cadillac, and GMC -- reported increased sales with the gains at Chevrolet and GMC mainly driven by strong demand for full-size utility vehicles and pickups. The company's car sales in May were up 20.2% year-over-year, truck sales increased by 8.1% year-over-year, and its large pickup share increased to 36.9%. The company ended the month with 77 days of supply (around 816,000 units) in inventory against 73 days of supply during 2013.

Ford, on the other hand, lost market share in the month of May. The company, which is introducing a range of new products and investing heavily in its future, is looking to the long term rather than the short term. Ford plans to launch 23 new vehicles worldwide in 2014 alone.

The company's sales increased 3% year over year to 254,084 vehicles. The company's car sales witnessed an increase of 17.7% year over year, with strong Fusion sales (a 15% increase YoY) offset by weak Focus sales (a decline of 13%). Truck sales were up 3.7% year over year while F-series sales declined 4.3% year over year. Ford lost ~385 basis points of share in the large pickup segment year over year. The company's total market share in the month was 15.7%, a decrease of ~130 basis points year over year. Ford ended the month with 67 days of supply (approximately 631,000 units) compared to 59 days last year.

Final takeaway
The country's auto sales rose by approximately 11% in May, which indicates that the damp demand earlier in the year resulted from extreme weather conditions rather than a dip in consumer confidence. Sales, pricing, the SAAR, and inventory all improved during the month for the auto industry. With the industry as a whole moving toward the peak of its economic cycle after the 2008 recession, the companies which performed best in the current economic environment were General Motors and the Chrysler Group, while for the long term Ford is looking extremely attractive.