Strong tally for March reflected extra selling day, better weather, increased incentives

By Adrienne Roberts and John D. Stoll 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 4, 2018).

To understand why the auto industry pushed the Trump administration to roll back emissions rules, take a spin in Ford Motor Co.'s flashy new Lincoln Navigator SUV.

Revamped for 2018, the hulking sport-utility vehicle is designed for an era of low gasoline prices. Customers flocked to Lincoln dealerships in March and shelled out an average $81,000 for its latest Navigator, Ford said, nearly 50% more than the outgoing model.

The Ford vehicle was among the biggest gainers in the U.S. auto market last month, according to industry sales reports published Tuesday, notching a 91% increase that mirrors results of other redesigned SUVs hitting the market -- including Ford's Expedition, Jeep's Wrangler and Cadillac's XT5. For instance, the pricey Wrangler, once a rough-and-tumble niche SUV, now outsells the entire eight-vehicle passenger-car lineup of parent Fiat Chrysler Automobiles NV.

Even as U.S. auto sales plateau, car companies stand to gain as consumers increasingly flock to the kinds of vehicles that would be less viable under emissions standards enacted by the Obama administration. The Environmental Protection Agency is easing those fuel-economy rules, making it more likely Detroit's Big Three and foreign rivals will sharpen the focus on profitable pickup trucks and SUVs that achieve much lower miles-per-gallon than the hybrids and smaller cars favored by the old mandate.

Overall U.S. auto sales were strong in March, aided by an extra selling day, strong incentives, fleet sales and a step-up in showroom traffic hampered by bad weather earlier in the year.

The shift toward larger vehicles remains the trend to watch, according to Jack Hollis, Toyota Motor Corp.'s North America sales chief, with the expectation that 70% of the overall market will soon be devoted to trucks and SUVs. In 2012, passenger cars still accounted for just over half of the market, according to AutoData Corp.

Higher sales of those models generally lead to meatier transaction prices at dealers since U.S. consumers will pay a premium for space or capability. This has a wide range of auto makers, from Nissan Motor Co. to Volkswagen AG, committing to stuff even more variants of SUVs into the dealer pipeline in coming years.

Though its March sales were a modest 1,711, the Lincoln Navigator is a proxy for America's appetite. Ford's sales chief, Mark LaNeve, said Tuesday the company has only a two-week supply of the SUV on dealer lots and "we're not sure we can meet demand all year."

Toyota's Mr. Hollis said "there may be [parts] of the SUV market that we should be looking at." For a brand known for fuel-sipping passenger cars, expanding SUV offerings will be essential if the Japanese auto maker aims to improve its U.S. market share.

Others are tracking the same trend. Honda Motor Co. will cut Accord sedan production in Ohio amid slack demand for fuel-efficient products. That follows moves by Detroit auto makers, including General Motors Co., to back away or even discontinue slow-selling passenger cars in favor of boosting supply of bigger products.

The car business is a relatively low-margin industry with long product cycles and enormous capital costs. That puts pressure on executives like Mr. Hollis to make accurate calls on consumer trends, and double down on vehicle segments that offer the biggest profits.

Because prior emissions standards called for an average of 50 miles per gallon in auto-maker fleets by 2025, the 20-mpg Navigator or Wrangler would need significant investment -- including costly batteries -- that would eat into the bottom line.

Nearly all of the biggest auto makers posted sales gains in March, an exception being Nissan. The month's seasonally adjusted annual sales rate came in at 17.48 million vehicles, compared with 16.8 million for March 2017, according to AutoData.

GM sold 296,341 vehicles in March, a 16% increase compared with the same period in 2017, with all of its brands achieving double-digit gains for the month. The March tally marked the end of a tradition for GM, as the company will begin reporting sales on a quarterly basis.

Fiat Chrysler said sales were up 14% in March at 216,063 vehicles, while Ford sales rose 3.5% to 243,021, driven by a 9% increase in sales to fleet buyers.

Write to Adrienne Roberts at Adrienne.Roberts@wsj.com and John D. Stoll at john.stoll@wsj.com

(END) Dow Jones Newswires

April 04, 2018 02:47 ET (06:47 GMT)