Automakers sold almost 1.1 million vehicles in March, a gain of more than 24% from the same month last year. Sales for this year's first quarter were almost 16% ahead of last year's. It was the best showing since the federal government's "cash for clunkers" stimulus program sent sales soaring in August.
The automakers were drawing out customers such as Brad Welker, a retired sheriff's lieutenant from Burbank, who took advantage of attractive leasing terms to get a new Toyota Camry.
"I asked Toyota of Hollywood what deals they had for a leased Camry and got a deal that was based on a price several thousand dollars below the sticker price," said Welker, 63. The lease deal included two years of free maintenance and saved Welker "a big upfront payment."
Welker said he had owned previous Toyotas, including a Sequoia SUV with 185,000 miles, and wasn't scared off by Toyota's recent spate of recalls for unintended acceleration and braking problems.
Toyota sales chief Don Esmond said shoppers such as Welker showed that consumers had "continued confidence in the safety and quality" of Toyota vehicles.
"It doesn't matter how good the deal is, I don't believe anyone would buy a new car or truck from a brand they didn't trust," he said.
These loyal customers helped push Toyota's sales up 40.7% to 186,863 vehicles in March, following a 9% drop in February as consumers shied away from the brand because of continuing controversy over unintended acceleration.
"There is no doubt that March was the bright spot of the quarter for both the industry and Toyota," Esmond said. March sales were helped by improved weather and pent-up demand from consumers reluctant to step into the market because of the slow economy, he said.
Analysts are divided on whether the attractive deals are bolstering sales temporarily at the expense of future business or if the uptick will continue into summer.
The deals include large discounts off sticker prices and low- or no-interest financing. Toyota and Honda have competing discounted-lease specials.
"The question is, did everyone who could be coaxed out with a good deal already buy a car?" said Michelle Krebs, an analyst with Edmunds.com, an auto industry research and information firm in Santa Monica. "We saw a very strong sales pace in the early part of the month, right after the incentives were announced. The pace really slowed at the end of the month, yet the same incentives were in effect."
Krebs said she believes that Toyota extended its incentives into April out of fear that its momentum wouldn't extend beyond its loyal customer base. "There are a lot of options out there right now. Hyundai and Nissan are being very aggressive," she said.
Others believe that the auto industry will continue to put up robust numbers compared with the recession-dampened results from 2009.
"We are dealing with a lot of pent-up demand. Many consumers have been sitting on the sidelines for more than a year," said Jesse Toprak, an analyst at TrueCar.com, an auto sales and pricing information company also based in Santa Monica.
He said some leading economic indicators pointed to growing sales, such as the "strengthening of the full-size truck segments, a sign that small-business and construction segments are starting to come back."
Ellen Hughes-Cromwick, Ford's chief economist, said a gradually improving economy was helping the auto industry.
"We think right now our vehicle sales forecast for the 11.5- to 12.5-million-unit range is quite achievable," Hughes-Cromwick said.
Ford sales rose 39.9% in March, when it delivered 183,425 vehicles, according to Autodata Corp.
"We saw incentives rise and prices fall at some of our competitors," said Ken Czubay, vice president of U.S. marketing, sales and service for Ford. He noted that Ford's incentive offering was about the same as the previous month and said the company was trying not to get sucked into a price war. It planned a major advertising campaign set for this month pitching what Czubay described as the favorable attributes of the automaker's vehicles.
Ford wants to limit its incentives to models that directly compete with Toyota's, such as its Fusion mid-sized car, which competes with Toyota's Camry, and its Focus sedan, which is a rival to the Toyota Corolla.
After being dropped into second place by Ford in February, GM regained the top spot as the largest auto seller in the U.S. Sales rose 44% in March compared with a year earlier, after factoring out the Pontiac, Hummer, Saturn and Saab brands it closed or shed as part of its bankruptcy reorganization last year.
Total combined sales for GM's remaining brands -- Chevrolet, Buick, GMC and Cadillac -- hit 184,871 for the month, according to Autodata Corp. Including the discontinued brands, sales rose 22% to 188,011.
The company captured 17.6% of the market in March, Autodata said, narrowly beating out Toyota, which had 17.5%, and then Ford with 17.2%.
Susan Docherty, GM's U.S. marketing chief, said the average sales price for GM vehicles was rising and the amount of incentives the company was putting into each deal was falling. GM offered incentives of about $3,351 per vehicle in March, down about 15% from the same month last year, according to TrueCar.com.
Nissan North America also posted a big gain, with sales rising 43.3% to 95,468. It surpassed Chrysler Group, whose sales fell 8.3% to 92,623. American Honda Motor Co. said its sales rose 22.5% to 108,262 vehicles in March compared with a year ago.
Overall, the industry's sales rate has "improved significantly" from an annual pace in the 10-million-vehicle range averaged over the last six months to about 12.5 million now, said Brian Johnson, a Barclays Capital analyst.
He said the retail sales pace, after factoring out fleet sales, looked to surpass the 10-million mark in March for the first time since 2008.
The rate of auto sales "over the rest of the year will largely depend on how long the industry's pricing battle goes on . . . which in turn could hinge on Toyota's next move," Johnson said.
"Toyota might back away from incentives [in April] to test the market, but if it perceives lasting damage to its brand, we believe the automaker could be back with more offers."