Auto Sales Probably Took A Sharp Dive In April: Toyota, Ford, And GM Will Fight For No.1 Spot

The incentives that drove March domestic car sales have begun to go away. These were driven primarily by manufacturers who needed to match Toyota’s (NYSE: TM) discounts as it tried to regain market share on the heels of its large recalls.

But, the lack of “deals” is expected to cause a drop in total US vehicles sales down by 7% from March levels. Domestic sales will drop to 988,000.

“In March, incentives really helped boost car sales — especially since Toyota’s high-profile recalls lead consumers to expect huge bargains,” observed Jessica Caldwell, Director of Industry Analysis for Edmunds.com. “In April incentives averaged nearly $200 less per vehicle industry-wide and sales fell along with incentives.”

The prediction raises a critical question about car company profitability. Is it volume or price that drives profits? That depends on how a car company’s plant and inventories are configured. Some of the firms that rely heavily on  the US market such as Chrysler may be better off selling large inventories even at low prices. Companies like Ford (NYSE: F), which have fewer days of inventory on hand, are likely to be better off by cutting incentive and letting customer come to its dealerships without offering special deals. Ford cars have also risen in quality and its new models are popular. At this point, to regain market share and some of its tattered reputation, Toyota (NYSE: TM) needs to prove that it can get its part of the market back at any price.

Ford’s momentum is expected to slow some in April, but given its pace that is not surprising. Edmund’s expected that Ford  “will sell 166,500 units in April 2010, up 25.9 percent compared to April 2009 and down 8.3 percent from March 2010.” That would increase its market share to over 16%.

Toyota should sell 167,800 units in April 2010, up 32.6 percent from April 2009 and down 10.2 percent from March 2010. As other companies like Chrysler lose share, Toyota’s piece of the US market will likely rise to 17%, close to where it was at its peak in 2007.

GM should sell 179,200 units in April 2010, up 4.1 percent compared to April 2009 and down 4.7 percent from March 2010. That would bring its US market share to 18.1%

Toyota and GM were the market share leaders in the US for almost three years. Improvements in Ford’s products made it a contender as the No.1 car company in America.

Now, month-by-month, it is a three-way race.

Douglas A. McIntyre

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