Automakers Resort to $4,100 Discounts to Clear Old Inventory

(Bloomberg) -- Automakers probably avoided a quarterly decline in U.S. retail sales for the first time in almost two years, but only by spending big on incentives to clear old cars and trucks from dealers’ lots.

• Retail sales were likely flat during the three-month period, according to researchers J.D. Power and LMC Automotive, but average incentive spending rose an estimated 6% to more than $4,100 per vehicle, a third quarter record. Old model-year vehicles accounted for 90% of quarterly sales, the slowest sell-down on record.

Key Insights

• J.D. Power’s findings are a potential knock against what analysts anticipate was a strong quarter for General Motors Co., and may be reason to be more bearish about what’s expected to have been a weaker period for Ford Motor Co. A GM spokesman said Monday the company will put out quarterly results on Wednesday, when Ford has scheduled its release and conference call.

• Before a strike now beginning its third week, GM had its pickup plants running at full speed, perhaps allowing the company to better compete with Ford and Fiat Chrysler and regain lost market share. In the first half of the year, GM’s ceded about 3 percentage points of share in the full-size truck segment, while Ram lured customers away from rivals, according to LMC Automotive.
• The seasonally adjusted annualized rate of total sales probably slowed in September to about 17 million cars and light trucks, based on the average estimate of analysts in a Bloomberg News survey. The pace was 17.4 million a year ago, according to Ward’s Automotive Group.
• For Nissan Motor Co., Toyota Motor Corp. and other automakers that are still reporting monthly results, September results are expected to be downbeat, in large part thanks to quirks of the calendar. There were two fewer selling days than in 2018, with the Labor Day holiday applying to August figures this year.

• Close to 250,000 vehicles were sold over the holiday weekend, according to J.D. Power, so those deliveries gave August results a bump and were a setback to automakers before they even got started selling cars in September.

--With assistance from David Welch and Melinda Grenier.

To contact the reporter on this story: Gabrielle Coppola in New York at gcoppola@bloomberg.net

To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, Chester Dawson

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