July New Auto Sales Boosted by Higher Incentives

U.S. new car sales rose 5% in July compared with July 2009, in part because of slightly higher incentives.

The seasonally adjusted annual sales rate of 11.6 million units in July was slightly higher than the 11.1 million unit rate during the first half of the year but was lower than most analysts’ predictions.

IHS Automotive analyst Rebecca Lindland said that while fleet sales fell in July, retail sales increased as bargain hunters began looking for end of model year deals. However, she said concern about the sluggish economic recovery is limiting their willingness to buy. Lindland said, “People are looking for a good deal, but we can’t get consumers really moving because they don’t see jobs coming back.”

Industry-wide, light truck sales were a major driver. In 2008, passenger car sales surpassed light truck sales in the U.S., but with fuel prices remaining below the $3 per gallon mark, light truck sales have made a comeback with July sales rising 19% to over half a million units sold. Meanwhile, car sales fell 5% to 549,805 units.

Of the major automakers, only Nissan and Hyundai-Kia posted double-digit sales gains for the month.

Nissan North America posted a 15% increase in sales compared with July of 2009. Nissan also reduced its average incentive by $234 compared with the record-high average of $2,839 it offered last July.

According to Edmunds.com, Hyundai-Kia saw its sales climb 20% for the month. The automaker also lowered its average incentive to $1,907. During the majority of the first half of last year, Hyundai-Kia’s average incentive was $2,500.

Hyundai Motor America’s head of sales, Dave Zuchowski, said the automaker hasn’t been able to keep pace with demand for some of its more popular models like the redesigned Sonata sedan and Tucson SUV. He said Hyundai-Kia’s biggest problem is “we can’t build enough cars.”

Edmunds.com reported that industry-wide incentives in July climbed an average of $63 per unit compared with the previous month to $2,753. Industry-wide incentives averaged $2,686 in July 2009 when the federal Cash for Clunkers program launched.

Detroit’s Big 3 automakers’ incentives were generally in line with the industry-wide average. Ford Motor Company increased its average spiff by 3%. The automaker’s chief sales analyst George Pipas said, “On balance, we’re pretty pleased with this result.” Ford was one of only three major automakers to see their sales increase in July. Pipas said, “So to get an increase over last year’s gains is quite an accomplishment.”

General Motors Company increased its average incentive by nearly $500 to $4,093 compared with July 2009. The 6% year-to-year increase in average incentives was the highest of the seven largest automakers.

Chrysler Group actually lowered its average incentive in July by $1,100 compared with the same month in 2009. Chrysler’s average incentive in July was $3,105.

American Honda held its incentives down to an average of $1,773 per vehicle in July. Japan’s No. 2 automaker has the lowest incentives of any of the major automakers.

Toyota, meanwhile, raised its average incentive by $902 compared with last year. Toyota’s average spiff last month was $2,204. Toyota’s general manager for its flagship brand Bob Carter said, “Loyalty levels are back to pre-January levels, and we are seeing an increase in competitive trade-ins.” Last spring Toyota sparked an incentives war among the major automakers when it raised discounts to historically high levels to combat slumping sales and customer defections caused by a series of safety recalls.

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