Even big sales incentives weren’t enough to prop up U.S. auto sales in March. Sales trailed estimates with sales at Ford Motor (F) and Fiat Chrysler Automobiles (FCAU) showing big drops of 7.2% and 4.6%, respectively. General Motors (GM) saw a smaller than expected 1.6% increase in sales.
The March figures cast doubt on analyst and industry expectations that U.S. auto sales would bounce back in 2017 from declines in the first two months of 2017. Carmakers have turned to heavy discounts and incentives in an attempt to cut inventories that are at the highest level in a decade.
Sedans and compacts took the brunt of the sales damage in March. The Chevy Malibu and the Ford Fusion sedans both saw sales drop by more than 35%.
In response General Motors has already cut back on production of models such as the Chevrolet Cruze and Fiat Chrysler has eliminated the Dodge Dart compact.
Auto industry analysts on Wall Street see those production cuts as just the first steps of a wider reduction. “Sales are under forecast, and there were a lot of incentives during the month,” Michelle Krebs, an analyst with Autotrader.com, told Bloomberg. “Before long, we will see more production cuts.”
The drop in total sales and in sedans and compacts in particular doesn’t mean that the bottom is about to fall out of automakers’ earnings. Consumers are buying more trucks and SUVs, which carry higher profit margins than sedans and compacts.
The effect of production cuts at automakers certainly isn’t a positive for the wider U.S. economy. The heady days when what was good for General Motors was good for the country may be long gone but the industry still has a big impact on sales at steel, glass and rubber makers–as well, these days, on sales at chip makers driving into the market for automobile silicon.
