U.S. Automakers Lean on Incentives to Boost Salesby
Car sales were brisk in November, according to reports trickling in throughout the day. Profits, however, were another matter.
With assembly lines in overdrive, automakers appear to be squeezing margins just to keep the metal moving. Ford, for example, said its average vehicle incentive was up about $600 over the year-earlier period (although its prices were up as well). “I won’t single out any competitor, but … November came to a close as a very aggressive competitive environment,” Ford’s U.S. sales chief, John Felice, said on a conference call today.
Ford and its rivals may not have had much choice. With a flood of attractive financing, the U.S. car market cruised right over plenty of economic obstacles this year until the government shutdown in October finally gave buyers pause. As sales slowed, lots filled up. U.S. dealerships entered November with more vehicles on hand than they’ve had in almost a decade—some 3.4 million in all.
The financial sweeteners certainly seemed to work as intended. Chrysler led the Detroit pack with a 16 percent increase in vehicles sold. General Motors posted a 14 percent gain, while Ford trailed with a 7 percent improvement over the year-earlier period.
Toyota boosted sales by 10 percent, in part because it offered Camry buyers 60-day, no-interest loans.
But the price tinkering raised flags with analysts. Even if it was arguably necessary to balance out the sales slump of the government shutdown, analysts don’t like to see auto executives lose their pricing discipline. It probably feels good to chase growth: More sales, after all, lead to more production and more assembly-line jobs. But unwinding manufacturing capacity is far harder for a carmaker than for a company that turns out, say, T-shirts or toys. The safest road remains the most profitable one.