GM, Nissan beat US sales estimates, tempering inventory angst

[SOUTHFIELD, Michigan] General Motors Co and Nissan Motor Co posted US sales gains that beat analysts' estimates, as surging demand for pickups and sport utility vehicles tempers concerns about swelling inventory of new vehicles.

GM said deliveries climbed 4.2 per cent last month, while Nissan reported a 3.7 per cent increase. Ford Motor Co's sales of cars and light trucks dropped by less than analysts estimated, as consumers snapped up Chevrolet Silverado trucks, Nissan Rogue crossovers and Ford Escape SUVs.

Auto dealers have been weighed down by bloated inventory in anticipation of robust demand this spring. Stronger-than projected sales may help automakers avoid deeper discounts or more widespread production cuts.

Analysts estimated that the industry's sales slowed last month to a seasonally adjusted annualised rate of 17.5 million light vehicles, according to a Bloomberg News survey, from 17.7 million a year earlier.

"Inventory is starting to swell, which is concerning considering that we're still months away from the peak summer selling season," Jessica Caldwell, an analyst at car-shopping site Edmunds.com, said in an email.

"The automakers are in a tricky spot: aggressive incentives are already starting to eat into profits and residuals, but it takes discipline to pull back the production reins in what's still a fairly strong market."

Automakers have supplied dealers as though the market would keep growing following last year's record 17.55 million annual sales. The inventory glut also is a reflection of the challenge facing the companies to make deep enough production cuts of slumping passenger cars, which Americans are snubbing in favor of SUVs.

Among eight major automakers in the US, GM, Honda Motor Co and Volkswagen AG were expected to post February sales gains. Combined deliveries for the VW and Audi brands may gain 17 per cent, as the German automaker recovers from an emissions scandal that halted sales of diesel models a year ago.

GM boosted discounts on its full-size trucks, supporting sales of the Chevy Silverado and GMC Sierra models that compete with Ford's F-Series and Fiat Chrysler Automobiles NV's Ram pickups.

Fiat Chrysler is expected to post the biggest drop among the major automakers, with analysts estimating a decline of about 8.4 per cent. GM spent 26 per cent more in discounts on each Silverado truck than Fiat Chrysler paid per Ram and 85 per cent more than Ford allocated for F-Series, according to JD Power dealer data obtained by Bloomberg News.

As GM staged a "Truck Month" promotion in February, Nissan advertised as much as US$5,050 off 2017 Altima sedans in some markets. Automakers marketed big incentives after it took dealers an average of 75 days to sell a car in January, seven days longer than a year earlier, according to data from Kelley Blue Book.

Even hot-selling SUVs are contributing to the industry's inventory issues. Manufacturers scrambled to meet surging demand for them and overbuilt in November and December, Jeff Schuster, an analyst with researcher LMC Automotive, said last month. Incentives on SUVs rose in January.

Production cuts have already begun. GM and Fiat Chrysler have eliminated shifts, laid off employees or scheduled days off early this year at plants making slower selling models including the Chevrolet Cruze compacts, Chrysler Pacifica minivans and Buick Lacrosse sedans.

BLOOMBERG