End of Cut-Rate Finance Deals Hurts Car Sales
Sales of U.S.-built cars fell 25.6% in late February, reflecting the mid-month expiration of cut-rate financing and other incentive programs that had helped boost the fortunes of U.S. auto makers, the companies reported Tuesday.
The decline late in the month pulled total sales for the month down 0.8% from the year-ago level despite a 12.7% increase by imported makes. Dealers delivered 831,871 cars in February this year, down slightly from the 839,129 delivered in the same month last year.
Makers of U.S.-built cars said their sales fell 5% last month, a decline due entirely to the sharp falloff in sales during the final 10 days. The seven domestic manufacturers sold 613,371 cars in February this year, compared to 645,317 last year.
New Financing Plans
Auto analysts said they had expected domestic sales to finish the month with a whimper despite the announcement last week by Detroit’s Big Three that they were beginning a new round of incentives.
“When an aggressive (sales) campaign is ending, dealers clear the pipeline in the last week,” said John Hammond, an industry analyst with Data Resources.
Hammond said that he expects sales to pick up this month but that the new round of incentives are not as attractive to consumers as those before and are not likely to provide the same stimulus to sales.
General Motors and Ford are offering 9.9% financing on selected models in place of the 7.7% rate that was part of the programs that expired in mid-February. Chrysler is offering a combination of discount financing and rebates.
Analysts added that the domestic industry’s continued reliance on incentives to prop up sales is an indication that the market may be too weak to maintain current robust production schedules.
Although February is a traditionally slow month for imports, since Japan’s quotas on exports expire in March and manufacturers must hold back shipments to comply with the restraints, an estimated 218,500 imported cars were sold last month, an increase from the 193,812 sold in February last year.
Smaller Share for Imports
Although the import market share of 26.3% was the lowest in nine months, analysts said the decrease was a function of limited supply, not falling demand.
For the month, domestic new cars sold at an annual rate of 8.1 million, while the import annual rate was 2.6 million.
The annual rate is a calculation of the number of cars that would be sold if the month’s sales pace were to continue for a full year.
AUTO SALES
Feburary % 1986 1985 change GM 51,587 346,616 +1.4 Ford 46,898 166,862 -12.0 Chrysler 80,322 102,162 -21.4 AMC 7,211 10,099 -28.8 VW U.S. 5,873 6,236 -5.8 Honda U.S. 14,637 13,342 +9.7 Nissan U.S. 6,843 -- -- DOMESTIC 613,371 645,317 -5.0 Toyota 39,998 43,161 -7.3 Nissan 30,711 36,493 -15.8 Honda 33,806 29,610 +14.2 Mazda 19,448 14,163 +37.3 Subaru 14,891 12,518 +19.0 Volvo 8,772 8,317 +5.5 VW Imports 10,268 8,202 +25.2 Others 60,606 41,348 +46.6 IMPORTS* 218,500 193,812 +12.7 TOTAL U.S. 831,871 839,129 -0.8 * Estimate
