March was another strong month of auto sales in the United States. The SAAR for the month of March came in at 15.27 million units, up from 14.14 million units in March of 2012. Let’s take a look at the results by OEM.
Ford
Best Ideas Newsletter holding Ford (click ticker for report: ) posted unit sales growth of 6%, driven by utilities (up 14%) and trucks (up 6%). Car sales were flat during the month, though we saw a solid increase of 6% for the redesigned Fusion, and we saw Police Interceptor sales ramp significantly with sales coming in at just under 1,000 units.
Consumers flocked away from crossovers, dumping the Edge (down 13%) and the Flex (down 35%), in favor of the Explorer (up 33%) and the Escape (up 28%). Total Ford brand SUV and crossover sales jumped 15% year-over-year. We believe consumers prefer the relatively superior fuel consumption profile of the Explorer and the Escape, and there is a chance the crossover trend is losing a bit of its luster. However, sales of competitors’ crossovers suggest otherwise. Sales of both the Edge and Flex are down year-to-date, so we’ll continue to monitor the sales trend. It could be a product issue at Ford.
Total truck unit sales increased 6% year-over-year, driven by a 16% increase in the F-Series—which sold 67,513 units during the month. We anticipate strong performance from the trucks segment to follow the strength in the US housing market, and we believe the F-Series’ value proposition puts the firm in a strong position.
The Lincoln brand’s weakness persists, and we see no signs of stabilization at this point. Lincoln SUV sales dropped 31% during March, while car sales fell 12%. For the year, Lincoln sales are down 24%.
Even though Lincoln was weak, we thought March was another strong month for Ford. Ford maintains a strong position in the US auto market, as well as the portfolio of our Best Ideas Newsletter.
GM
General Motors (click ticker for report: ) posted a solid sales gain of 6% during March, driven by a 12% increase in fleet sales. GM’s luxury segments really stood out, with sales at Cadillac jumping 50% and Buick sales surging 37% year-over-year. The Buick Enclave eschewed the negative trend of crossover sales at Ford, with sales up 55%. Luxury sedans performed well for both brands, as sales of the Buick Verano and Cadillac XTS drove the rest of both brands’ growth.
Chevrolet’s sales were flat for the month, with sales of pickups disappointing. The Silverado mustered a sales gain of only 8%, even though the company slashed production of the smaller pickup, the Colorado. Volt sales declined 35% for the month, making us wonder if the Tesla (click ticker for report: ) Model S will suffer the same fate one year into production. Crossover and SUV sales at Chevrolet, as well as GMC, were fantastic, with broad-based gains from the Traverse, Tahoe, Yukon, Acadia, and Equinox.
We were pleased with GM’s March results, but shares do not provide a sufficient margin of safety for us to add them to the portfolio our Best Ideas Newsletter—though we admit, its relative valuation looks attractive.
Toyota
Toyota (click ticker for report: ) posted a strong sales month for March, with sales growing 1% on an absolute basis, while increasing 4.8% on a daily sales rate (DSR) basis. Toyota sold a whopping 205,342 units during March, with Toyota unit sales falling 0.5% and Lexus sales jumping 15%.
Corolla sales led the way for Toyota, growing 11% year-over-year, while the Avalon more than doubled its sales, but off a base of just 3,000 units a year ago. The Prius and Camry were pockets of weakness, which is not what we’ve come to anticipate from either vehicle. Sales declined 23% and 12%, respectively. We’re not overly worried, primarily because we believe the Avalon is cannibalizing some of the Camry’s sales base. As for the Prius, the hybrid and EV landscape appears considerably different from the days when the Prius was one of the only games in town, so we think its market share could erode.
Toyota’s truck sales were solid for March, with sales of the Tacoma jumping 22% and the Tundra up 8%. We believe Toyota possesses a strong competitive position, capable of stealing market share from vulnerable competitors like Chevrolet and Honda (click ticker for report: ).
As for Lexus, car sales jumped 13% during the month, with SUV sales increasing 18% year-over-year. Unlike Mercedes and BMW, which have flocked to move cars “down-market,” Lexus decided to maintain its premier position, which could have a positive impact on sales. Interestingly enough, sales of Lexus’ lower-end ES unit were strong, but so were sales of Lexus’ high-end LS unit. We’d be disappointed to see Lexus move down-market since we like the brand’s current margin profile.
Overall, Toyota rebounded nicely from its supply-chain issues in 2011 to reclaim its spot as one of the top manufacturers in the US. Shares currently trade near the low-end of our fair value range, and we think the stock has potential upside from its current levels.
Honda
Honda posted a fantastic March as unit sales jumped 7.1% year-over-year, driven in a large part by the Honda Accord, which grew its sales 36%. The Accord received mostly positive reviews, and consumers appear to be gobbling them up. The Civic didn’t fare quite as well, with sales falling 2%. Truck sales were weak, falling 5% in spite of a 41% increase in Ridgeline sales. This is one area where Honda clearly lags competitors.
Acura posted great results with the introduction of its new ILX model boosting sales 26% for the entire brand. The ILX is Acura’s response to “value” luxury, and even if it jeopardizes value in the long-run, the low-end luxury vehicles are receiving fantastic initial reception.
Overall, Honda’s March was solid, but we don’t like its relative valuation, nor do we see much upside for shares on a DCF basis.