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U.S. Auto Strength Shows in Four-Year High as Discounts Ebb

Automakers sold cars and trucks in the U.S. in February at the fastest clip in four years without outsized discounts or deliveries to less-profitable fleet customers, marking increased retail demand.

Light-vehicle sales in February accelerated to a 15.1 million seasonally adjusted annual rate, or SAAR, the fastest since February 2008, according to Autodata Corp. That was achieved with lower spending on incentives than a year earlier and a stronger share of deliveries to retail customers than in January, according to Autodata, Ford Motor Co. and analysts at RBC Capital Markets and Deutsche Bank.

“It clearly speaks to the pent-up demand of the consumer that pricing remained strong,” Joseph Spak, an analyst for RBC in New York, said today in a phone interview. “There still was some fleet component but the retail SAAR definitely increased sequentially. It’s an encouraging sign that retail demand increased.”

Spending on discounts and promotions in February fell by 4.7 percent to an average of $2,457 per vehicle, according to Woodcliff Lake, New Jersey-based Autodata. General Motors Co. led automakers in cutting incentives by $616, or 17 percent, to $3,116 per vehicle. Toyota Motor Corp. cut incentives by $408, or 20 percent, to $1,595 per car and truck.

Sales to retail customers accounted for about 80 percent of industrywide deliveries in February, up from 75 percent in January, Rod Lache, a New York-based analyst for Deutsche Bank, wrote today in a research note.

Fleet Mixes

GM’s mix of sales to fleets were about 25 percent for the month, in line with the Detroit-based automaker’s full-year plan, Don Johnson, vice president of U.S. sales, said yesterday on a conference call. Ford’s share of sales to fleet was 32 percent in February, down from 35 percent a year earlier, said Erich Merkle, sales analyst for the Dearborn, Michigan-based company.

U.S. automakers GM, Ford and Chrysler Group LLC drove about half of the sequential increase in the industry sales rate, countering the notion that deliveries are getting a short-term boost from pent-up demand for Japanese automakers recovering from last year’s supply shortages, Deutsche Bank’s Lache wrote.

Sales trends are making it “increasingly likely” that automakers reach full capacity at their North American plants this year, he said. Researcher LMC Automotive on Feb. 23 raised its estimate for 2012 light-vehicle output in the region to 14 million, from 13.8 million.

Ford’s Production

Ford plans to increase second-quarter production in North America by 2.8 percent to 730,000 cars and trucks, according to a company statement yesterday. The automaker’s forecast exceeded IHS Automotive’s estimate that Ford would cut output to 686,000 vehicles.

The 15.1 million sales rate for February exceeded the 14.2 million pace that was the average of 17 analysts’ estimates. GM deliveries rose 1.1 percent to 209,306 cars and light trucks. Chrysler sales increased 40 percent to 133,521 and Ford’s climbed 14 percent to 178,644.

GM and Ford yesterday reiterated their full-year sales forecasts. GM sees 2012 sales in the range of 13.5 million to 14 million and Ford forecasts deliveries of 13.5 million to 14.5 million. Both include medium- and heavy-duty trucks in their guidance.

A 15.1 million selling rate “probably is not sustainable” because upcoming months are seasonally better for sales, RBC’s Spak said. Total industry sales rose 16 percent to 1.15 million cars and light trucks, according to Autodata.

“January and February are low historical sales months so the seasonal factors are quite high,” Spak said. “When you do have this small unit change, be it from higher fleet, the still-continuing recovery of the Japanese or even the more mild winter, it has an outsized effect on the annualized rate.”

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