Slowing Vehicle Sales Could Spell Trouble Amid High Inventories

Top U.S. automakers generally reported sales declines in March in the wake of a report detailing sharply higher inventories at dealerships.

(AP Photo)
(AP Photo)

Top U.S. automakers generally reported sales declines in March in the wake of a report detailing sharply higher inventories at dealerships.

General Motors reported a 5 percent increase in sales last month, but Detroit counterparts Ford and Fiat Chrysler reported declines of 7 percent and 5 percent, respectively.

Among their top overseas rivals, Toyota and Honda reported more modest decreases as Nissan said that March sales climbed by 3 percent.

Those six companies comprised nearly 80 percent of the U.S. auto market in February, according to numbers from The Wall Street Journal. The Associated Press reported that overall vehicles sales declined 1.6 percent last month compared to March 2016.

(AP Photo)(AP Photo)

The numbers followed a forecast from Edmunds.com that said vehicle inventories reached their highest point since 2004.

Although higher inventories were expected as vehicle sales remain at near-record levels, a decline in sales could prompt dealerships to offer more discounts to clear their lots — and erode automakers' profits as a result.

High inventories levels are currently impacting smaller cars, which suffered as sales of trucks and SUVs boomed. Although automakers were generally happy to see that trend — larger vehicles also provide larger profit margins — Edmunds analysts said that inventories were beginning to increase in those segments as well.

The car-buying website said that auto sales would be flat in the first quarter of the year and were likely to fall short of 2016's sales record.

“The industry was at record levels, and now they’re starting to come off of that," Edmunds executive director of industry analysis Jessica Caldwell told Fox Business. "It makes it really hard to plan.”

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