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March continues strong sales pace

March 30, 2012
New-vehicle retail sales were on track to end the first quarter of 2012 particularly strong, with performance in March continuing the trend from the past several months, according to a new monthly sales forecast developed by the industry.
J.D. Power and Associates and LMC Automotive projected March new-vehicle retail sales to come in at 1,085,800 units—the highest monthly volume in more than 30 months and equal to a seasonally adjusted annualized rate of 11.6 million units. Retail transactions are the most accurate measurement of true underlying consumer demand for new vehicles.
“Each month of strong sales brings with it increased optimism that the pace of growth represents a true recovery for the sector,” said John Humphrey of J.D. Power. 
“Barring any future shock related to geopolitical issues in the Gulf region and further upward pressure on the price of oil, we believe sales will continue on a solid pace for the balance of the year.” 
Through the first half of March, subcompact and compact cars accounted for about 23 percent of retail sales in the United States, the highest level since the “cash for clunkers” program was implemented in 2009. As a result, subcompact and compact cars are quickly moving off dealer lots. 
Combined, subcompact and compact cars were on dealer lots an average 42 days before being sold, compared to the 48-day industry average, and registering turn rates substantially lower than in 2011—17 fewer days for subcompact cars and 46 fewer days for compact cars. 
Conversely, full-size pickup trucks are sitting on dealer lots an average 68 days, 11 days longer than they were a year ago. 
Total light-vehicle sales in March were expected to come in at 1,372,400 units, a 6 percent increase from March 2011. In addition to the strong retail performance, fleet mix has been higher than normal for the first two months of the quarter, with January and February averaging 24 percent. March was expected to finish slightly lower at 21 percent of total sales.
Sales outlook 
The 2012 outlook for vehicle sales remains positive, as the first quarter selling rate was expected to come in at 11.6 million units for retail and 14.4 million units for total light vehicles. This sales tempo is ahead of the forecast for the full year of 11.4 million units for retail light-vehicles and 14.1 million units for total light vehicles.
“The first quarter selling rate has outperformed the annual forecast for sales for the first time since 2008, when the automotive market started to decline,” said Jeff Schuster, senior vice president of forecasting at LMC Automotive. “The vigorous start to 2012 suggests that there is further upside potential if the current pace continues through the summer months.” 
Continuing the current trend, small-car sales (subcompact and compact segments) are expected to remain strong throughout 2012, with combined segment share at nearly 20 percent of total light vehicles. 
“Small-car mix is benefiting from higher gas prices and new models entering the segment, with 41 small car models in the market in 2012 compared with just 30 back in 2007,” said Schuster. “Overall share of small cars in 2012 is expected to climb to its highest level ever, at nearly 20 percent of total light-vehicle sales.” 
North American production
North American light-vehicle production through February is up nearly 23 percent compared to the same period in 2011. BMW leads the European manufacturers in year-to-date production volume increases, up 42 percent due to higher production of the X3. The Japanese OEM production volume continues in recovery mode, with volume up 26 percent YTD February from YTD February 2011. The Detroit 3 had about a 20 percent year-over-year increase in production volume. 
Production levels are expected to remain at a higher level in the first quarter of 2012, with volume forecasted at 3.8 million units, up almost 15 percent from the first quarter of 2011. 
Looking ahead to second quarter production, an increase of 18 percent from last year is expected, with nearly 3.7 million units to be built (last year’s second quarter was affected by the Japan earthquake supply disruptions).
Vehicle inventory declined to a 57-day supply at the beginning of March, compared with a 66-day supply at the beginning of February. Car inventory is at below-normal levels with a 48-day supply in March, down from 60 days in February, while truck inventory levels fell to a 66-day supply (previously at 72 days).