U.S. auto sales rose almost 10 percent in September, allaying concerns of a double-dip recession as major automakers forecast stronger sales through the remainder of the year.
Among the Detroit automakers, General Motors Co
Still battling to rebound from the effects of the March earthquake in Japan, Toyota Motor Corp <7203.T> and Honda Motor Co <7267.T> posted sales declines of almost 18 percent and 8 percent.
Industry wide auto sales rose 9.9 percent in September from a year earlier. The annualized sales rate hit 13.1 million vehicles, the strongest sales rate since April.
GM sales chief Don Johnson said the September auto sales and other recent economic data all point to a slow growth scenario but not a double dip.
Despite fears of a renewed downturn and volatile financial markets in September, customers returned to showrooms, driven in many cases to trade in aging vehicles that they had been holding on to since the recession.
As the economy seems to be stabilizing a little bit, I think there are a lot of people who had been postponing buying new vehicles now finally coming to replace vehicles, said Ford economist Jenny Lin.
The U.S. sales gains contrasted with Europe, where car sales in Spain and Italy fell to their lowest September levels in 15 years, and sales in France also dipped.
Japan also experienced a drop in September, as Industry wide auto sales fell 2.1 percent.
Nissan Motor Co <7201.T>, which restored production faster than Toyota and Honda after the earthquake, saw a U.S. sales gain of 25 percent. Volkswagen AG
Sales of pickup trucks and SUVs were especially strong in September, bolstered by steady gasoline prices in the month and stepped-up sales incentives.
Sales of GM trucks and SUVs rose 34 percent, while they were up 24 percent at Ford and 35 percent at Chrysler. Trucks and SUVs typically represent an outsized contribution to profit because of their higher prices and richer margins.
In another indicator of economic resilience, U.S. factory activity expanded at a faster pace than expected in September, the Institute for Supply Management said on Monday.
U.S. auto sales represent one of the earliest snapshots of consumer demand.
Gary Bradshaw, a portfolio manager at Hodges Capital Management in Dallas, who owns Ford shares, said the strong sales results had failed to dispel concerns about the economy.
Half of the market's out there saying we're going into a recession and the other half's saying we're not, he said, adding he was optimistic for recovering auto demand.
The average vehicle on U.S. roads is almost 11 years old, two years older today than the average in 2007. At some point, analysts have said, those older cars will break down beyond the point of cheap repairs, spurring replacement sales.
GM shares ended 2.2 percent lower at $19.73 on the New York Stock Exchange on Monday while Ford shares ended down 3.1 percent at $9.37.
EXPECTATIONS FOR RECOVERY
Morgan Stanley analyst Adam Jonas, who rates GM shares overweight, said in a note for clients that it was hard to knock GM's September performance.
Jonas said GM deserved credit for running down its inventory of pickup trucks to 88 days of supply at the end of the month, down from 107 days in August. GM continues to deliver on what it can control while its stock price continues to trade on fears of what it cannot, he said.
Chrysler, the No. 3 U.S. automaker, had its best performance for September since 2007. Chrysler is managed and primarily owned by Italy's Fiat SpA.
Analysts and auto executives said they expected to see sales strengthen through the remainder of 2011, in part as Honda and Toyota start to compete with fuller dealer lots of inventory and better deals for consumers.
The worst is behind us and we expect to exceed year-ago sales levels beginning in October with continued growth throughout the fourth quarter, said Bob Carter, the head of Toyota brand sales in the United States.
Toyota offered zero-percent financing in October on seven of its most popular models including the all-new Camry.
Honda and Toyota lost more market share than other major automakers from March to September. Honda's share was down 2.2 percentage points to 8.5 percent, while Toyota lost almost 3 points to 11.5 percent.
Paul Ballew, chief economist at insurer Nationwide, said he expected the U.S. sales rate to hold above 13 million for each month through December.
The problem is that moving above that will require help from the economy that we're not getting yet, said Ballew. We're inching our way back up.
Before the industry downturn, U.S. also sales averaged nearly 17 million vehicles a year. Sales began to fall in 2008 and by 2009 hit the lowest level since the early 1980s, at 10.4 million vehicles sold.
(Reporting by Bernie Woodall and Ben Klayman and Deepa Seetharaman, writing by Kevin Krolicki, editing by Matthew Lewis)