[MICHIGAN] Automakers' decision to scale back US discounts in August is a sign they're willing to maintain some price discipline, even if it raises the odds that industrywide annual sales will fall for the first time in seven years.
August reports arriving on Thursday may show a seasonally adjusted annual sales pace of about 17.2 million cars and light trucks, according to a Bloomberg survey of analysts, down from a 17.9 million rate in July that was the highest of the year.
Incentives were lower than in July, when General Motors Co offered 20 per cent cashback on several Chevrolet models, according to vehicle-shopping website TrueCar.
Automakers aren't chasing sales at any cost, the practice that helped force GM and Chrysler to restructure through bankruptcy in 2009. While discounts have, at least on paper, crept back up to pre-recession levels, there's more cushion than ever: Transaction prices are at a record high as buyers opt for bigger vehicles with nicer interiors, electronics and driver-assist features.
With that profit protection, carmakers don't mind if the industry snaps a record streak of sales increases.
"It may or may not be a record but, look, any time you're above 15 million is good," said John Mendel, Honda Motor Co's head of US sales. "I'm bullish on the rest of the year."
The discipline is helping the industry stay profitable while it's still backed by strong, if weakening, underlying trends: low unemployment, available credit, high equity valuations, cheap gasoline.
Even so, that has failed to cheer investors, who are more preoccupied with the lack of growth in the US market and potential disruption to the industry from new technology, new entrants and new concepts of personal mobility.
While the Standard & Poor's 500 Index gained 6.5 per cent this year through Tuesday, GM lost 6.9 per cent, Ford Motor Co. fell 11 per cent and Fiat Chrysler Automobiles NV plunged 24 per cent.
And it's not just the traditional US automakers under pressure from investors: Toyota Motor Corp, Daimler AG and BMW AG have all dropped 17 per cent or more in 2016.
With the discounts eased, industrywide sales may have fallen about 3.5 per cent in August, according to the average estimate in the Bloomberg survey. Among the projected declines are 8.2 per cent for Ford, 4.9 per cent for GM and 6.6 per cent for Volkswagen AG's VW and Audi brands. GM said on Tuesday that its sales would probably be down 5 per cent to 6 per cent.
Buyers continue to favour pickups and sport utility vehicles. Light trucks, which also include minivans, probably rose to 59 per cent of all sales in August, according to Goldman Sachs, from 56 per cent a year earlier.
The truck demand is helping Fiat Chrysler. Its deliveries are predicted to rise 5 per cent, compared with year-earlier results that were revised last month after dealers and federal regulators called its reporting practices into question.
One company bucking the truck trend is Honda, whose car sales rose 6.8 per cent through July - more than double its 3.3 per cent gain for light trucks. Deliveries of the redesigned Civic gained 18 per cent through July, overtaking Toyota's Corolla, while sales of the refreshed Accord rose 5.8 per cent, cutting the Toyota Camry's lead almost in half. For August, analysts estimated Honda's sales climbed 1 per cent.
"We're not doing it with incentives," but rather with improved models, Honda's Mr Mendel said.
"Great product still wins."