Spurt by fleets is major factor in sales recovery
Jesse Snyder
Automotive News -- June 14, 2010 - 12:01 am ET

Ford says the F series, the country's best-selling vehicle, is a hot fleet item this year because there's a new Super Duty model for commercial users.


That first-quarter lift in U.S. auto sales isn't all it appears to be.

The 16 percent growth overstates the improvement from the dismal levels of 2009.

An Automotive News analysis of first-quarter fleet data shows retail sales -- a better indicator of true demand -- rose only 6 percent. The rest of the overall gain came from a dramatic 61 percent rise in fleet sales as corporate and government buyers re-entered the market.

"Fleet sales are certainly playing a big part in industry improvement because fleet was so low last year," said Jeff Schuster, head of forecasting for J.D. Power and Associates. He said fleet sales will continue to outpace retail gains the rest of the year, growing to 2.2 million units from 1.8 million last year.

Some companies have shifted their retail-fleet mix significantly this year.

For example, Hyundai-Kia Automotive's 14 percent sales gain in the first quarter is slightly below the industry's growth. But Hyundai-Kia slashed fleet sales to 24 percent of its total, from 34 percent a year earlier, meaning retail sales grew 31 percent.

At the same time, domestic automakers are capturing most of the rising fleet sales.

Last week, Mike Jackson, CEO of AutoNation, called for U.S. automakers to report retail and fleet sales separately, saying the lack of clarity distorts sales and inventory data.

"Without that information, you can really disguise what's going on in the industry and [within] a specific company," he said.

The Automotive News Data Center calculated fleet sales by subtracting retail registrations provided by R.L. Polk from total automotive sales. The dates of a vehicle's sale and registration can vary slightly, but averaged over a 90-day period, the distortion is minimal.

The Automotive News sales analysis is based on the latest Polk data available. It is in line with less detailed fleet sales estimates provided by J.D. Power and Associates and Edmunds.com, both of which calculate retail sales directly.

It's not surprising that GM and Chrysler show the biggest fleet gains this year because those automakers lost the most in early 2009, Schuster said.

"Both GM and Chrysler shut most of their plants in the first quarter as they prepared for bankruptcy," he said. "Their inventories were so low that anything they built got funneled to retail."

In what became the worst quarter of the slump, fleet sales plummeted even faster than retail because corporate managers could postpone purchases of vehicles.

Good fleet sales -- which include commercial and government purchases -- virtually stopped. "And even daily rental -- the [less profitable] bad fleet -- stopped, too," Schuster said.

This year fleet sales doubled to 29 percent of GM's first-quarter mix, from 14 percent a year earlier, Polk said.

Steve Carlisle, GM vice president of U.S. sales operations, said the increase was "driven by higher-than-normal" daily rental sales. Rental companies held their vehicles longer than normal in 2009."

Carlisle said GM expects the pace of fleet sales to slow in the coming months and account for 25 percent of GM volume this year.

Ford expects fleet sales to end the year at 30 percent of total volume, about the same as in 2009 and 2008. Ford sales analyst George Pipas said more sales are going to government and commercial fleets than daily rental companies.

"The commercial fleet is higher profit," he said. "We shifted at least 5 points from the daily rental business to commercial in the last few years."

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