Auto Sale Remained Strong in September

Generous incentives and pent-up demand kept auto sales for the fourth straight month in September.

According to a Reuters poll, annualized auto sales for the month are expected to reach approximately 14.5 million units. Sales rates for the previous three months were also above 14 million units. Analysts say generous cash incentives and attractive financing terms are largely behind the boost in September sales.

According to Kelly Blue Book analyst Alec Gutierrez, however, pickup truck sales were down for the month. The decline came despite generous cash incentives that reached as much as $10,000 per vehicle on some models. Gutierrez attributes the lower-than-expected sales to high fuel prices and said, “All the manufacturers overestimated the strength of the truck market this year and probably overproduced.”

GM currently has 122 days of truck inventory on dealer lots; much higher than the generally accepted optimal 80 day level.  Chrysler Group LLC has a 99 day supply of pickups while Ford Motor Company is slightly below the optimal level, with a 77 day supply of light trucks.

To help move the excess inventory, GM is offering cash discounts as high as $3,500 on the 2012 Chevrolet Silverado pickup. Chrysler is offering discounts of up to $4,000 on its Ram 1500. Despite its low inventory, Ford is offering discounts of as much as $5,500 on its 2012 F-150 pickup.

According to Jefferies analyst Peter Nesvold, some dealers are offering incentives as high as $10,000 on selected pickup models. Nesvold said, “That’s clearly not a sustainable number. But right now I think the market will draw some relief that GM is able to sell down excess inventory in a measured way.”

Pent-up demand is a driving force behind the September auto sales.  Many consumers postponed buying new vehicles as the dust settled following the economic downturn in 2008, and subsequent government-backed bankruptcy restructurings of GM and Chrysler in 2009. Asian automakers also suffered setbacks as the result of the March 11 Japan earthquake and tsunami.

Now, higher inventories and easier credit are convincing many consumers to return to dealer showrooms. predicts that U.S. auto sales will reach 14.4 million units this year, and increase another four percent, to 15 million units, in 2013.

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