PREVIEW-U.S. March auto sales seen up, but gas prices weigh

* U.S. auto sales seen at 13.2 mln rate in March-poll

* Sales seen off slightly from Feb. as incentives decline

* Japan turmoil not seen affecting sales; gas a concern

By Ben Klayman

DETROIT, March 29 (Reuters) – U.S. auto sales in March are
expected to rise about 12 percent from last year’s depressed
levels, but high gasoline prices and production problems caused
by the Japanese earthquake could slow a recovery, analysts and
investors said.

Auto sales represent one of the first snapshots every month
of U.S. consumer demand, and while an increase from last year
is expected, lower incentives will likely mean a decline from
February. However, that does not scare investors who like the
industry’s recovery story.

“Gas prices and disruptions with the Japanese earthquake
are relevant, we pay attention to them, but it doesn’t change
the medium- or longer-term backdrop of there being some
compelling fundamentals for new-car sales,” said Walter
Stackow, a senior research analyst with Manning & Napier.

Stackow, whose firm owns shares in BMW (BMWG.DE: Quote, Profile, Research), Suzuki
(7269.T: Quote, Profile, Research) and several dealers, cited the average age of cars
topping 10 years, sales trailing the rate at which people scrap
older vehicles, the rising cost of used cars and the improving
financing market as reasons for longer-term optimism.

Automakers are set to report March auto sales on Friday.

March is traditionally a stronger sales month than
February, but lower incentive spending by General Motors Co
(GM.N: Quote, Profile, Research), Toyota Motor Corp (7203.T: Quote, Profile, Research) and others likely resulted
in a lower growth rate than February’s stronger-than-expected
27 percent gain, analysts said. [ID:nN01121963]

For the sixth consecutive month, sales on an annualized
basis are expected to top 12 million vehicles in March.

The average forecast of 34 economists surveyed by Reuters
was 13.2 million vehicles on that basis, up from 11.78 million
last year, but off slightly from 13.4 million in February.
[ID:nL3E7EP25O]

J.D. Power and Associates expects a 9 percent increase in
March sales, while TrueCar.com and Edmunds.com estimate gains
of 12 percent and 16 percent, respectively. [ID:nN24128696]

PAIN AT THE PUMP

Despite the expected sales increase, rising oil prices and
the resulting pain at the pump could push consumers away from
more lucrative light trucks, analysts said.

J.P. Morgan analyst Himanshu Patel estimated in a research
note that each $1 increase in the U.S. retail price of gas
results in a 5 percentage-point shift toward lower-margin cars
for the industry.

Light truck sales, which include pickup trucks and sport
utility vehicles, make up a little more than half of U.S. auto
sales and account for a disproportionate share of profits at
the U.S. automakers because of their higher prices.

Gas prices rose more than 3 cents to $3.60 a gallon over
the last week, the Energy Department said. The average price of
regular gas is 80 cents higher than a year ago as conflict in
Libya and rising tensions in the Middle East have sent the cost
of crude oil to above $100 a barrel. [ID:nN28206060]

“I don’t think at these levels it’s going to affect car
sales,” said Gary Bradshaw, a portfolio manager with Hodges
Capital Management, which owns Ford shares.

“The auto recovery is still intact,” he added. “I still
think we’ll see 13 (million) to 13-1/2 million cars sold in
this country this year, but if oil (hits) $125 a barrel then
all bets may be off.”

Another focus is the aftermath of the Japanese earthquake
and subsequent tsunami earlier this month that caused many
supplier plants there to close or cope with power outages.

GM, Ford, Toyota, Honda, Nissan and other automakers have
all idled plants or scheduled downtime at facilities because of
the parts shortages.

Even a shortage of a specialty pigment that gives cars a
glittering shine prompted Chrysler Group LLC (FIA.MI: Quote, Profile, Research) and Ford
Motor Co (F.N: Quote, Profile, Research) to temporarily restrict orders on vehicles in
certain shades of black, red and other colors. [ID:nN25285934]

The parts shortages may cut global vehicle output 30
percent within six weeks in a worst-case scenario, research
firm IHS Automotive said. [ID:nN24186350]

Most analysts do not see the shortages affecting March
sales much, but if it continues, April or May sales could be
hurt because there will be fewer cars on dealer lots to sell.

Deals for consumers are already drying up as TrueCar
estimated the industry’s average incentive spending per vehicle
in March would drop 6 percent from February to $2,432, driven
by declines of 17 percent and 11 percent at GM and Toyota,
respectively. Edmunds sees a 9.5 percent drop.
(Reporting by Ben Klayman in Detroit; Editing by Maureen
Bavdek)

PREVIEW-U.S. March auto sales seen up, but gas prices weigh