New Car Sales Dip 2.4% in Mid-May

Domestic new car sales fell 2.4% in mid-May from a year ago, the U.S. auto makers reported Friday. However, analysts said sales were only weak in comparison with last year’s exceptionally strong performance.

Analysts credited the recently enhanced financing incentive programs offered by Detroit’s major auto makers for the healthy sales posted in the May 11-20 period.

“The rebates are working,” said David Healy, an industry analyst with Drexel Burnham Lambert. “The year-to-year comparison is misleading because the mid-May period in 1985 was one of the strongest of the year.”

The seven U.S. auto makers said they sold 261,680 new cars in the second 10 days of the month, down slightly from last year, when 268,025 were sold. The 1985 period’s sales pace was the best since 1978, a banner year for the auto industry.

Sales for the period represent an extremely strong seasonally adjusted annual rate of 9.2 million units, lower than the 9.5-million annual rate posted in the period last year but much higher than this year’s 7.7-million average. The annual rate is a calculation of the number of cars that would be sold if a period’s sales pace were to continue for a full year.

The unusually high annual rate prompted analysts to predict that sales will fall slightly as the incentives lose their initial appeal. They noted, however, that even an 8-million annual rate would be sufficient to prevent an oversupply of cars. When inventories get too high, auto makers often order production cutbacks.

“The worst fears about production cuts in order to get inventories in line will not be realized if sales stay even close to where they are,” said Harvey Heinbach, an analyst with Merrill Lynch.

Of Detroit’s Big Three auto makers, only Chrysler reported a gain for the period, up a scant 0.3%. General Motors and Ford said their sales were off 2.4% and 3.1%, respectively.

Among the smaller manufacturers, American Motors said its sales continued to fall, down 52.2%, while American Honda reported an increase of 31% and Volkswagen U.S. a gain of 27.4%.

Nissan U.S., which has temporarily halted auto production at its only domestic plant, said its sales were off 2.4%.

AUTO SALES

May 11-20 May 11-20 % 10-Day 1986 1985 change GM 159,437 163,425 -2.4 Ford 60,875 62,803 -3.1 Chrysler 33,613 33,503 +0.3 AMC* 1,435 3,000 -52.2 VW U.S. 2,632 2,066 +27.4 Honda U.S. 3,421 2,612 +31.0 Nissan U.S. 267 616 -56.7 TOTAL 261,680 268,025 -2.4

*Estimate