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US auto sales approach records as consumers defy global slump

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The US may be the lone bright spot in an otherwise sluggish global economy as American consumers continue to buy expensive new vehicles at record levels.

[MICHIGAN] The US may be the lone bright spot in an otherwise sluggish global economy as American consumers continue to buy expensive new vehicles at record levels.  With several automakers having reported US sales, companies say the industry is on pace for the best April ever. They're selling more expensive sport utility vehicles and pickups, a clear sign that consumers are confident enough to make big purchases.

April's results show a rebound from the first quarter, when sales were at historically high levels but showed slowing growth. If consumers keep buying cars through the summer, when auto sales are typically strong, it could mean that the US economy can withstand the economic malaise around the globe.

"It's a very nice rebound from the softness we saw in March," said Jeff Schuster, senior analyst with IHS Automotive in Troy, Michigan.

"The US economy is set up pretty well to weather the global slowdown. The next several months will be the real test."

The strong month came even as automakers pulled back on rebates and incentive deals. General Motors Co said that all carmakers discounted vehicles by about 10 per cent of average transaction prices.

In the first quarter, the average discount amounted to 11 per cent of the average sale price, Schuster said.

Fiat Chrysler Automobiles NVsaid Tuesday that its US sales rose 5.6 per cent in April, beating analysts' estimates and extending its streak of monthly gains to more than six years - thanks to the popularity of Jeep SUVs and Ram pickups. Nissan Motor Co and Toyota Motor Corp also beat estimates, while Ford Motor Co and GM missed lofty expectations.

FCA's sales reached 199,631 cars and light trucks, the automaker said in a statement. That easily beat analysts' estimates of 4.3 per cent growth. Jeep sales, which boosted the carmaker's first-quarter profit, jumped 17 per cent from a year earlier, as Compass and Renegade more than doubled. The Ram truck brand gained 12 per cent to 45,810.

"Consumer preference for SUVs and pickup trucks continued unabated in April and helped to propel us to our strongest April sales in 11 years," Reid Bigland, head of US sales for FCA, said in the statement.

The company has been increasing production of SUVs and pickups to meet consumer demand.

Even as consumers slowednew-vehicle purchases in March, a strong labor market, available credit and relatively cheap gasoline will fuel 17.8 million in new car and light truck deliveries in 2016, beating last year's record, according to a Bloomberg survey.

"There was a little bit of nail-biting in terms of what March was and what it meant going forward," said Kevin Tynan, an auto-industry analyst with Bloomberg Intelligence. "April was important."

Despite the strong month, GM shares fell almost 2 per cent to US$31.15, Ford was down 1.6 per cent to US$13.40 and FCA was off more than 3 per cent to US$7.95 at 11:17 am in New York.

Auto stocks fell during a broad market sell off that saw the Dow Jones Industrial Average and Standard & Poor's 500 Index both fall more than 1 per cent.

Nissan was projected to be the biggest gainer among the top automakers and it didn't disappoint: Sales rose 13 per cent, topping the 11 per cent average estimate.

Nissan brand light-truck sales rose 10 per cent to an April record, and the brand set an April record for cars, too, with Sentra up 12 per cent and Altima up 29 per cent.

Toyota's US sales rose 3.8 per cent in April compared with the year-ago period, slightly beating estimates. That included a 5 per cent increase at the company's Toyota division, which sold 186,243 cars and trucks in April. The division's truck sales set a record for the month, with RAV4 sales up 32 per cent and Highlander sales up 9.3 per cent. At Toyota's Lexus luxury division, sales dropped 3.8 per cent.

Honda Motor Co sales rose 14 per cent, beating the average estimate for a 10 per cent increase.

Ford's light-vehicle sales rose 3.6 per cent, shy of the average estimate for a 3.8 per cent increase, according to Bloomberg. Sales of the F-Series pickup line rose 13 per cent and SUV sales also jumped 7.7 per cent.

The Dearborn, Michigan automaker's 231,316 total deliveries, including heavy trucks, marked its best April for retail sales in 10 years.

In another sign that consumers are buying expensive vehicles, sales for the Ford Explorer rose 22 per cent. The SUV starts at more than US$31,000 and can reach well over US$50,000.

GM, the only US automaker projected to report a decline, fell more than analysts had projected as sales dropped 3.5 per cent, compared with the average estimate of a 1.7 per cent drop.

All four of GM's brands were down for the month. The Detroit automaker said it has pulled back on low-margin sales to rental fleet customers and focused on selling more expensive cars to retail buyers, where it reported a 3.3 per cent increase.

Chevrolet Silverado sales rose 8.7 per cent to 49,990, and the new Malibu mid-size sedan gained 25 per cent to 21,763, GM said.

The automaker's pullback on low-margin fleet sales and its focus on retail has resulted in lower-than-expected sales in many months.

That's by design because GM is trying to boost pricing and profits, said Kurt McNeil, GM's vice president of US sales. The strategy has helped GM post record profits in North America last year and in the first quarter of this year.

For the whole industry, the average projection was for a 17.5 million annualized selling rate for the month, adjusted for seasonal trends.

That pace would be an increase of 800,000 from April 2015, which had one less sales day than last month. The month may be even better than anticipated. Fiat Chrysler projected a 17.9 million rate, including medium and heavy-duty trucks, which typically account for at least 200,000.

"A lot of eyes are on auto sales," Mr Schuster said. "They tend to be out in front of things as it relates to overall health of the economy, of the US consumer. We saw a little bit of weakness in consumer confidence recently, so this should help with that to bring those consumers that are questioning: Where is the US economy right now?"

BLOOMBERG