Auto sales are estimated to remain flat compared to last month but up from April 2012, making the automobile industry one of the economy’s strongest sectors.
New car sales will remain above a 15 million unit annual selling pace for the sixth consecutive month, according to economists surveyed by Bloomberg. While Kelley Blue Book projects light vehicle sales to surpass 1.3 million units by month end – an 11.4 percent annual gain, TrueCar.com has a more conservative estimate of 10.7 percent increase.
“One word can summarize the auto sales so far in 2013 – stable,” said Jesse Toprak, senior analyst for TrueCar.com.
Automakers are expected to announce their April sales on Wednesday. Driven by a host of factors, auto sales might boast of a highest April since 2007.
A bulk of the upswing in April is forecasted to come from full-size pickup trucks. KBB estimated pickup sales to grow at more than 26 percent from same time last year. Steady gains in new-home construction starts would further fuel the pickup sales according to analysts.
“Relatively lower gas prices coupled with small business demand improving for trucks resulted in a strong showing for small and large pickups in April,” said Toprak. “A trend we expect to see strengthen even further for the rest of 2013.”
In the short term, steadily declining gas prices since February this year are expected to bump up auto sales for April. A gallon of unleaded gas averaged $3.55 in April, down 34 cents compared to a year earlier, according to AAA.
On the other hand, automakers traditionally report lower sales in the month of April due to the tax deadline. Since a lot of people who owe money to IRS wait till the April 15 deadline to file their taxes and send checks to the tax department, less people are left with money to spare in buying a car.
“Tax refunds are one reason why car sales have held up in past months against the fiscal cliff and the payroll tax hike,” said Jeremy Anwyl, Vice Chairman for Edmunds.com referring to people who file early and get tax refunds, eventually being able to spend that money towards a down payment while buying a car. “However, it is possible we may see a drag on sales from people who actually owed tax and filed in April.”
Yet that may not stop most major automakers, especially the “Detroit Three” – Ford, General Motors and Chrysler from doing well in April. According to average estimates from TrueCar.com and KBB, Ford is expected to grow 16 percent compared with last April, while GM and Chrysler are expected to report 11 percent gain each.
Of the top automakers, Hyundai is the only one expected to post decline in April due to stiff competition from recent redesigns of other manufacturers.
However, the good news for the auto industry is that the gas prices are expected to drop further by mid-summer, according to AAA. Analysts estimate auto sales will hit 15.3 to 15.5 million units in 2013.
“The slow pace of the economic recovery has done little to slow down the auto recovery,” said Alec Gutierrez, senior analyst at KBB. “Provided that the economy can at least maintain its slow growth trajectory, we expect auto sales to remain on their pace.”