Incentive Programs Boost U.S. Car Sales in Early May

Enhanced discount financing programs offered by the major domestic auto makers took hold in early May, and sales for the first 10 days of the month rose 9.1% from the same period a year ago.

According to reports released Wednesday, the seven U.S. auto manufacturers sold 237,800 new cars in the May 1-10 period, up from 217,896 in the 1985 period.

Detroit’s Big Three auto makers are offering incentive programs consisting of cut-rate financing at rates varying from 10.9% to 5.8%, depending on the model and the length of the loan contract. Analysts said the incentives, which were expanded at the beginning of the month after dismal April sales, appear to be working. But they warned that the current sales pace will be hard to preserve as import inventories are replenished in early summer.

“Early May’s healthy sales rate is going to be hard (for domestic manufacturers) to maintain,” commented David Healy, an industry analyst with Drexel Burnham Lambert. “It is going to take a lot more than balloons in showrooms to keep it up.”

Healy added that he expects the domestic auto companies to continue to offer some incentives indefinitely in order to keep inventories at manageable levels.

Chrysler reported the largest sales gain, up 23.1%, while Ford and GM said their sales rose 11% and 7.5%, respectively.

Analysts noted that with 58.4% of the market, GM appears not to have been penalized because of its price hikes last month even though the other U.S. auto makers did not follow its lead.

On a seasonally adjusted basis, new cars sold at a strong annual rate of 8.7 million in early April, up from the 8.1-million rate in the 1985 period and a substantial gain over late April’s rate of 7.9 million.

AUTO SALES May 1-1 May 1-1 % 10-Day 1986 1985 change GM 138,870 129,21 +7.5 Ford 58,753 52,919 +11.0 Chrysler 33,672 27,359 +23.1 AMC* 1,435 2,950 -51.3 V.W. U.S. 1,444 1,690 -14.6 Honda U.S. 3,234 3,202 +1.0 Nissan U.S. 392 564 -30.1 TOTAL 237,800 217,896 +9.1