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WESTLAKE VILLAGE, Calif. — Following a sluggish February dampened by auto recalls and wintry weather, incentive programs have lifted dealership traffic in March, leading to much improved new-vehicle retail sales that are expected to climb 25 percent year-over-year, according to J.D. Power and Associates.

More specifically, J.D. Power projects U.S. new-vehicle retail sales will reach 883,300 units, up 678,824 vehicles in the prior-year period.

This translates to a retail seasonally adjusted annualized sales rate of 9.9 million units, compared with 8 million in February and 7.6 million in March 2009.

"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," commented Jeff Schuster, executive director of global forecasting at J.D. Power and Associates.

"March sales could outperform projections if the pace does not level off as expected for the remainder of the month," he added. "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," Schuster continued.

Overall, total light vehicle sales (which include fleet) are likely to hit 1.092 million units, a 23-percent year-over upswing.

In particular, J.D. Power anticipates fleet sales will be 209,000 vehicles sold for March, a 13-percent improvement over the prior-year period.

The total light vehicle SAAR for March is forecasted at 12.1 million units, up from 10.3 million in February and 9.7 million last year.

Other than the CARS-related hike in August, the last time the annual sales rate has hit 12.1 million was September 2008, officials pointed out. This positive movement "reflects significant progress in the industry's recovery."

Production Numbers

Continuing on, J.D. Power also looked at North American production, which is on pace for the 2.8 million unit mark for the first quarter. This would be a year-over-year gain of 70 percent.

February vehicle production was 922,000 units, an increase of 57 percent versus the prior-year period.

Meanwhile, J.D. Powers' projection for 2010 full-year production is at 10.6 million, versus 8.5 million vehicles built last year.

Inventory level was 67 days' supply as of the beginning of the month. A year ago, it was 101 days' supply.

There have also been improvements in capacity utilization, which is likely to be 61 percent for 2010. A year ago, it was 47 percent. This upswing has been spurred by the production level rebound and cuts in capacity.

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

Going Forward

Finally, J.D. Power offered an outlook for 2010.  There are still unemployment issues that continue in the overall economy, but consumer spending during January and February was "stronger than expected." Furthermore, the auto segment has made strides, as well.

The company still projects total new-vehicle sales will be 11.7 million units for full-year 2010, and maintains its retail sales projection of 9.6 million vehicles.

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