By Maddy K. Perkins
The Polar Vortex kept cold-weary Americans out of the showroom this past month, but there’s no need to panic yet.
The eight major U.S. automakers reported a 0.1 percent drop in sales from January, falling slightly short of forecasters expectations. Manufacturers sold about 1.2 million cars.
After adjusting for seasonal trends, Monday’s reports show that automakers are on pace to sell 15.3 million vehicles in 2014 – a rate that’s even with last year’s sales.
“The rate of sales itself is fine, maybe one of the better ones you’ve seen in recent years,” said Gennadiy Goldberg, a strategist at TD Securities. “It’s just not growing as quickly.”
Federal Reserve chairwoman Janet Yellen blamed “unseasonably cold weather” for recent weak economic reports. Auto experts also blamed blizzards and bitter cold for Monday’s weak reports.
“Poor weather conditions are just not conducive to auto sales,” Goldberg said. “You had a literally frozen consumer that wasn’t able to go out and purchase the cars.”
The stall in sales raised concern that a slow start to 2014 would mark the end of the auto industry’s recent ascent. That, however, may not be a bad indicator.
“We knew we were going to come to a point that the growth was going to slow down for a sustainable market,” said Jesse Toprak, Chief Analyst at Cars.com. “I don’t see that as bad news, what’s happening right now is we’re reaching more of an equilibrium in the car market that’s healthier and more sustainable.”
There were some winners this month: some manufacturers are reporting an increase in SUV sales, suggesting that consumers may have opted to buy vehicles better suited for icy road conditions. In its press release, Chrysler reported an overall sales increase of 11 percent – its best February since 2007- but its Jeep brand vehicle sales went up a whopping 47 percent. Overall SUV sales increased by 9.1 percent over last year’s February numbers.
More good news: Top three American automakers GM, Toyota and Ford all said sales improved in the second half of the month. While the rebound was minimal, it appears unlikely that the February numbers will impact spring sales. Based on projections for the historically strong month of March, Senior Analyst Alec Gutierrez at Kelley Blue Book estimates an adjusted annual selling rate of 16 million units.
Due to an unusually high level of inventory, consumers may expect better deals in the months to come.
“Dealerships will be motivated to discount and manufacturers will have to offer sizeable incentives to get rid of inventory,” Toprak said. “We anticipate higher levels of discounting and more incentive spending for manufacturers.”
If forecasters are right, the auto industry will be a key factor in the ongoing economic recovery as the year progresses.
“I think the industry has come a long way since 2009 when we only sold about 10 million cars,” said Gutierrez. “With that rebound we see automakers investing in additional plants, which translates to additional jobs in the manufacturing sector and for the folks who are employed both directly and indirectly. I think the industry is headed in the right direction and that it’s a good sign for the economy.”
