Uh-oh, investors in Ford Motor Company (NYSE:F), General Motors (NYSE:GM), Fiat Chrysler Automobiles (NYSE:FCAU), Toyota Motors, and Honda: Sales could decline this month; it might be time to run for the hills!
I say that entirely in jest, although March could be only the sixth month that new-vehicle sales in the U.S. market decline in year-over-year comparisons since 2009. Before anyone starts to panic or claim that sales in the U.S. automotive industry have peaked, let's take a deep breath and look closely at a couple of factors impacting the results set for release on Wednesday. Let's also look at which major automakers are projected to be the biggest winners and losers in March.
Selling days and seasonality
For the record, TrueCar forecasts a minimal 0.8% decline in overall industry sales, compared to last year's March. However, some auto investors will quickly remember that last year's severe winter weather all but froze new-vehicle sales in January and February before that pent-up demand was released, resulting in a very strong March in 2014. Thus, without the same seasonal factors putting a dampening effect on this year's January and February, March is facing a tough comparison in terms of overall unit sales.
For that reason alone, one of the more critical figures to watch when sales reports are released Wednesday is the industry Seasonally Adjusted Annual Rate, or SAAR. Last year's March checked in at roughly 16.4 million units, and despite a likely lower overall unit volume of sales for this year's March, TrueCar anticipates the SAAR to check in at a healthier 16.9 million -- J.D. Power even predicts March to reach 17 million.
Further impacting overall unit sales is simply that this March also has one fewer weekend (and one fewer selling day) to generate sales compared to last year's March. So, investors can relax if Wednesday brings headlines that claim the industry sales are in decline without said headlines adding necessary context.
"The U.S. continues to be one of the brighter spots in the global vehicle sales picture in 2015 with stable volume growth," Jeff Schuster, LMC Automotive's senior vice president of forecasting, said in a press release.
Digging deeper into sales, let's take it one step further. Overall unit sales are tracked as sales from each major automaker to their respective dealerships. However, retail sales, which are sales from dealerships to the end consumer, can be more indicative of the industry's health. Fortunately, for automotive investors, retail sales are expected to increase 4% on a selling-day adjusted basis compared to last year's March, according to J.D. Power. In fact, this year's March is expected to have the highest retail sales volume for any March since 2007.
But wait, there's more!
Beyond improving retail sales, there's also more to be optimistic about. The industry's incentive spending for March is expected to decrease 0.4% from February 2015, and is expected to check in 1.3% below March 2014. Simultaneously, while incentives are in decline, average transaction prices are on the rise, making for a more profitable sales mix. Consider that the industry's overall average transaction price for the first part of March rose to $30,530 in the U.S., according to J.D. Power, which would be the highest level ever for March.
With all of those factors in mind, let's check out the expected winners and losers. Thanks to the hardworking folks at TrueCar, here's a look at the March forecast for sales per major automaker in the U.S.
After discussing the importance of selling days, seasonality, transaction prices, and incentives, as well as retail sales, you're now fully equipped to understand the sales results in case Wednesday brings on a "decline" in overall unit sales. This article should give you all the context needed to understand that the automotive industry in the U.S. remains very healthy, and very profitable.
Daniel Miller owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.