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It's official: Auto industry firing on all cylinders

CNBC's Phil LeBeau reports on the state of automaker stocks, including Toyota and Honda increasing incentives.

It’s hard to say whether there’s a direct link between the strong surge in April car sales and the four-year high the Dow Jones industrial average is on track to set today, but both are clearly delivering a dose of much-needed news about an uncertain economic recovery.

With the last few automakers finally reporting, the industry appeared to continue gaining momentum despite worries about fuel prices and other economic issues. General Motors boosted its forecast for all of 2012 by a full 500,000 vehicles, to somewhere between 14 million and 14.5 million.

That’s despite the fact that both GM and Ford posted modest declines for April -- as did Asian rival Nissan -- but the slowdown in sales that some feared after the unusual warm winter clearly didn’t materialize.  And a number of makers, including Audi and Volkswagen, are today bragging about setting records. VW sales were their best in 40 years, Audi their best ever for the month.

“It’s good to see the market is still growing,” said David Sullivan, an auto analyst with AutoPacific, Inc.  What surprised Sullivan -- and many other analysts -- was the fact that while demand was up for small, high-mileage vehicles, American motorists also plunked their money down on many of the bigger pickups that were supposedly going out of style.

Related: Chrysler sales jump; Ford, GM dip slightly

Nissan, for example, set new April sales records for both its small Rogue crossover and subcompact Versa models.  But demand, the maker said, was also up for the full-size Titan pickup as well as the big Quest minivan.

Also noteworthy was the fact that the industry, on the whole, maintained its momentum without having to ramp up incentives.  Quite the contrary.  OVerall, manufacturers trimmed rebates and other givebacks by an average 4.7 percent compared to March of this year, or about $120 a vehicle -- with the average car, truck or crossover sold in April 2012 carrying incentives of $2,446, according to data collected by research firm TrueCar.com.

There were a few exceptions, notably Honda ramped up spending by 8 percent for the month, to $2,398 per vehicle, while Toyota increased its givebacks 4.4 percent, to $1,823, said TrueCar.

"Incentives continued to decline for most automakers with the exception of Honda and Toyota as both are vying for recapturing their lost market share from last year,” said Jesse Toprak, TrueCar’s director of industry trends and insights. “Ford is now spending less on incentives as a percentage of their average transaction price then Honda.”

The spending did appear to pay off, however, with Toyota sales increasing 11.6 percent for the month while Honda’s rose 9.2 percent to April 2011. The incentives helped the smaller maker breathe some life back into its fading Accord line.  Long one of the nation’s top-sellers, that midsized sedan took an embarrassing slip in recent months, falling behind the Nissan Altima.  Accord was up 41 percent for the month, handily outpacing the Altima.

But Nissan’s April slowdown reflects, in part, the fact that it trimmed back production of its midsize model in preparation for the launch of an all-new Altima next month.  And CEO Carlos Ghosn has boldly declared his belief that the next-generation sedan will be able to overtake both Accord and the long-dominant Toyota Camry.

Nissan’s Infiniti division was in the black for April, buoyed by demand for its new three-row JX crossover.  Company officials recently predicted that they’re on track to hit 200,000 units in annual sales in the next several years -- which would move the long-lagging luxury brand into the upper tier of upscale marques.

The initial success of the big JX -- as well as Nissan’s other large trucks and crossovers was matched by strong demand for some of the bigger models in the Chrysler corporate portfolio, especially the Jeep Grand Cherokee.

Chrysler posted a 20 percent overall jump in April, with all of its brands exceeding the industry average sales increase. The Fiat brand surged 336 percent after a painfully slow launch of the little Fiat 500.  It was, in fact, the 25th consecutive month of sales gains for Chrysler and the 14th month in a row when the maker beat the industry average increase.

“Chrysler continues to surprise on the upside every month now,” said analyst Joe Phillippi, of AutoTrends Consulting.  “The new products, the Grand Cherokee, the 300 and even the 200 are doing well.”

Like other analysts, Phillippi suggested the Detroit maker has been countering its long-time reputation for poor quality with new vehicles that are “really well screwed together.”

That was echoed by Reid Bigland, president and CEO of the Dodge brand and Chrysler’s head of U.S. sales.

"This business is all about product,” he said, “and the quality and fuel efficiency of our current vehicle line-up has never been better which is evident in our results."

The April numbers are particularly impressing analysts because they are less dependent both on incentives and on fleet sales, a traditional dumping ground for manufacturers desperate to keep their factories humming.  Lower fleet business was the primary reason behind the modest decline at General Motors -- where retail sales ran roughly flat with April 2011 -- and at Ford. 

But the latter maker could crow about the strong demand for its higher-mileage models, including both the Edge crossover and midsize Fusion, both setting April sales records.  On the high end, buyers yet again bought more full-size F-Series pickups with V-6 engines rather than the traditional big-truck V-8s.

Can the market maintain its momentum?  Analyst Phillippi is upbeat, at least for the near-term, suggesting that even the modest U.S. economic recovery is sending buyers back to showrooms.  That’s particularly true for products like the F-Series and Nissan Titan.

“There are a lot of people who need work vehicles, especially to replace the ones they’ve been hanging onto” during the recession, said Phillippi. “A lot of those trucks are just wearing out.”

GM raised its forecast for the year to somewhere between 14 million and 14.5 million, which could mean a year-over-year jump of about 1.5 million units compared to all of 2011.

“We expect gradual improvement in the economy going forward,” said Don Johnson, vice president, U.S. Sales Operations. “Over time, strength in the manufacturing sector and strong retail sales will lead to more job creation. That will help more consumers put the recession behind them, gain even more confidence and drive vehicle sales higher for both the industry and GM.”