March sales surge on tap for auto industry

By Shawn Langlois is a reporter for MarketWatch in San Francisco., MarketWatch March 31, 2010.

SAN FRANCISCO (MarketWatch) -- Generous incentive spending, spurred by the once-thrifty Toyota Motor Corp., likely led to a huge spike in March U.S. vehicle sales, with retail demand expected to reach levels not seen in about two years.
Automakers will hand in their monthly tally on Thursday and analysts are looking for Ford Motor Co. /quotes/comstock/13*!f/quotes/nls/f (F 12.65, +0.08, +0.64%) to pace a broad industry surge.

Chrysler is seen as the only possible exception, as its dearth of new products could lead to the only decline among the major manufacturers.

Toyota /quotes/comstock/13*!tm/quotes/nls/tm (TM 80.35, -0.07, -0.09%) is expected to ride its record level of promotional spending to a 37% jump from a year ago, according to Edmunds.com. While not quite as bad as analysts had forecast, Toyota's sales in February still fell 8.7% to 100,027 vehicles. See full story.

Toyota, working to rebound from its recall fiasco, is offering zero-percent financing and some leasing deals on several of its top-selling models through April 5, triggering competing deals from most of its rivals.

TrueCar.com forecast that Toyota's spending rose to $2,318 per vehicle, up by a third from February, its highest ever, and by 47% from a year ago. Meanwhile, General Motors Co. and Chrysler both likely spent more than $3,300 per vehicle. See full story.

Ford's sales are pegged to rise 56%, with Nissan Motors /quotes/comstock/11i!nsan.y (NSAN.Y 17.17, +0.26, +1.54%) and Hyundai /quotes/comstock/11i!hymlf (HYMLF 66.60, -66.60, -50.00%) not far behind. Ford surpassed rival GM in monthly sales last month for the first time in a dozen years.

GM and Honda Motor Co. /quotes/comstock/13*!hmc/quotes/nls/hmc (HMC 35.30, -0.17, -0.48%) are expected to post increases of more than 20% each for March.

The industry's seasonally adjusted annual rate of sales is seen reaching 12.4 million cars and trucks, according to Goldman Sachs. The broker pointed to not only the financing promotions but also the carryover of demand from February as bad weather and the recall mess led customers to defer sales into March.

Jeremy Anwyl, CEO of Edmunds.com, also pegged the number at 12.4 million but cautioned that it's "too early to wave the flag" and claim the economy has finally turned the corner.

"Incentives drove sales this month," he said. "But those were defensive moves in response to Toyota stepping up incentives and are unlikely to last because inventories are simply not high enough to justify them in the long term."

Barclays Capital was even more sanguine with its outlook, calling for a total SAAR of 12.5 million and a retail SAAR, which excludes fleet sales, topping 10 million cars and trucks for the first time since 2008.

"The shape of the U.S. SAAR over the rest of the year will largely depend on how long the industry's pricing battle goes on for, in our view, which in turn could hinge on Toyota's next move," analyst Brian Johnson said.