New vehicle buyers are returning to dealer showrooms in March, lured by incentives, after recall news and bad weather kept them away in February, according to data analysts.

JD Power sees total light vehicle sales for March turning in a seasonally adjusted annualised rate (SAAR) of 12.1m units.

March new vehicle retail sales are projected to increase by 25 percent, compared with the same period one year ago, according to JD Power.

It says that March new vehicle retail sales are expected to come in at 883,300 units, which represents a SAAR of 9.9m units. This reflects a retail SAAR increase of nearly 2m units, compared with February 2010. Compared with March 2009, retail sales are projected to increase by 2.3m units.

"New vehicle retail sales increased robustly during the first half of March, and are expected to remain strong throughout the remainder of the month - setting the industry recovery back on track," said Jeff Schuster, executive director of global forecasting at JD Power.

"March sales could outperform projections if the pace does not level off as expected for the remainder of the month. However, there is some risk that the incentives offered by Toyota could spark an incentive war among several automakers. While this may lead to a temporary increase in sales momentum, it could also potentially slow the pace of long-term recovery."

JD Power says that fleet sales continue to increase from historic lows in 2009 and are expected to increase by 13 percent from March 2009 to come in at 209,000 units in March 2010. Total light vehicle sales for March are projected to come in at 1,092,000 units -an increase of 23 percent compared with one year ago.

Edmunds said that an early look at March auto sales indicates that sales are currently pacing at a SAAR, of 13.2m.

“The industry has been recharged by incentives offers from Toyota and other automakers,” observed Edmunds.com Senior Analyst Jessica Caldwell.  “There is a lot of money in the marketplace right now, and people are responding.”
 
“Toyota’s incentives announcement immediately generated nearly a 40 percent spike in that brand’s purchase intent by visitors to Edmunds.com,” noted Edmunds.com Senior Analyst Ray Zhou.

“But Toyota’s market share has dropped from its high point earlier this month because other automakers’ incentives programs have been effective as well.”

Edmunds.com cautioned that car sales for the latter portion of the month will weaken.

“We shouldn’t view this as a sign that the economy recovering; this sales bounce is driven by incentives. Take away the incentives and the sales will slow dramatically,” stated Edmunds.com CEO Jeremy Anwyl.

Despite ongoing issues with unemployment, consumer spending has been stronger than expected during the first two months of the year and the automotive market is continuing to improve. JD Power's 2010 forecast remains at 11.7m units for total sales and 9.6m units for retail sales.

"Due to improving economic conditions, downside risk appears to be subsiding," said Schuster.

"However, the market remains very dynamic, and it will be critical for sales momentum to be sustained as the market heads into the spring selling season."

North American Production

JD Power also noted that North American vehicle production is continuing to increase, with volume in February 2010 reaching 922,000 units, up 57 percent from February 2009. For the first quarter of 2010, production is on target to reach 2.8m units, an increase of 70 percent from the same period one year ago. Production volume for 2010 overall is expected to increase by 25 percent to 10.6m from 8.5m in 2009.

At the beginning of March, vehicle inventory was at a 67-day supply, compared with 101 days in March 2009.

Capacity utilisation in North America has improved from 2009 due to the recovery in production levels, as well as reductions in capacity, and is forecasted to reach 61 percent in 2010, compared with 47 percent in 2009.

"Since 2006, more than 1.2m units of excess capacity has been cut from North American production levels," said Schuster. "Capacity is now at 17.9m units, which is still well above current and near-term production levels of 10.6m units, suggesting that additional production cuts may be necessary as a new, leaner industry takes shape."