Discounts Boost U.S. Automakers
Spurred by wildly popular “employee discount” plans from U.S. automakers, sales of cars and trucks soared to a record 1.8 million in July, up 16.1% from a year ago.
General Motors Corp., Ford Motor Co. and Chrysler all posted strong gains as they halted, at least for a month, a decades-long slide in market share in the face of stiff competition from imports.
The records weren’t exclusive to U.S. manufacturers, however, as several Asian automakers posted record July sales without matching the price cuts.
A “rising tide of bargains lifted the market industrywide,” said Jim Press, president of Toyota Motor Corp.’s U.S. sales unit, which posted the best July in its 48-year history. Honda Motor Co., Nissan Motor Co. and South Korean automaker Hyundai Motor Corp. also posted record July sales.
GM set the stage for the blistering sales performance in June when it launched its employee discount plan, selling most models at the same price that GM employees pay.
Ford and Chrysler matched GM’s move with their own discount campaigns last month.
The price plans, while exciting customers, didn’t represent much of a bargain over spring prices that already were steeply discounted by an average of more than $3,000 per vehicle, including cash rebates and other incentives, said David Healy, auto industry analyst with Burnham Securities Inc.
July “was a marketing masterpiece of smoke and mirrors,” he said.
Indeed, automakers claim that their spending in July on sales incentives, including the employee discounts, was only marginally higher than in past months. But the plans, hailed by some industry watchers for their simplicity, let GM, Ford and Chrysler enjoy big sales boosts.
Ford led the advance, posting a 28.5% gain compared with July 2004. Chrysler sales were up 26.6% -- excluding its Mercedes-Benz stablemate -- and GM reported a 15.2% gain.
The spurt of enthusiasm gave Ford the best-ever month for its F-150 pickup, generating at least $3.6 billion in sales just for that one model, said George Pipas, sales and market analyst at Ford.
GM posted its best monthly sales in 26 years. And Chrysler said that not only did it set a record for July, but monthly retail sales -- to consumers rather than rental fleets and corporate motor pools -- also hit an all-time high.
Also on Tuesday, GM reversed its decision to end its 2-month-old employee discount program after Ford and Chrysler said they would extend their plans through Sept. 6. GM now will offer it through the same date as well, but only on 2005 models. Ford is including some 2006 models in its discount pricing.
“It felt pretty good this month, and we didn’t want to stop,” Pipas said.
Experts warned that the summer sales pace was likely to begin slowing as the popular plans wind down.
“There will be some payback” because the incentives pulled many buyers into the market before they normally would have been shopping, GM market analyst Paul Ballew said.
Meanwhile, sales for Japanese and South Korean automakers also picked up.
July sales for Toyota increased by 8.1%; Honda was up 10.3%; Nissan reported a 15% sales gain; and Hyundai sales rose 10.7%.
Overall, the “Big Three,” excluding their foreign nameplates such as Ford’s Jaguar subsidiary, held a combined 60% share of the U.S. market in July, up from 58.2% a year earlier.
Imports, with a collective 40% share, were down from 41.8% in July 2004.
For the first seven months, however, it’s a different story.
The U.S. makers’ share for the January-July period was 58.7%, down from 59% a year earlier. Without the employee-discount sales binge, the Big Three’s market share could easily have been a point or two lower.
Pickup trucks and sport utility vehicles made up the bulk of the July sales increase, accounting for 60.7% of passenger vehicle sales industrywide, and for more than 70% of the U.S. brands’ sales.
Only three of the 18 automakers doing business in the U.S. failed to capitalize on the July sales boom.
Mitsubishi Motors said sales fell 7.3% for the month after half a year of double-digit drops.
Isuzu Motors posted a 69% decline to just 845 passenger vehicles sold.
And a stumbling Volkswagen reported a 12.1% decrease as a redesigned Jetta failed to offset the flagging fortunes of other models, including the Touareg SUV.
GM shares fell 33 cents to $36.53, and Ford rose 3 cents to $10.88. DaimlerChrysler climbed $1.37 to $50.74. Toyota rose 80 cents to $38.60; Honda advanced 36 cents to $26.20.
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Revving up sales
U.S. vehicle sales in July by top automakers and percentage increase from a year earlier
*--* Change from Maker Sales July ’04 GM 524,218 +15.2% Ford 365,329 +28.5 Chrysler* 240,146 +26.6 Toyota 216,417 +8.1 Honda 143,217 +10.3 Nissan 107,300 +15.0 Hyundai 44,431 +10.7
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*Exludes the Mercedez-Benz and Maybach lines
Source: Autodata
