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Automakers Post Strong US Sales Amid Fear Discounts Inflating Demand

Automakers Post Strong US Sales Amid Fear Discounts Inflating Demand

(Getty/Justin Sullivan)

Thursday, 01 December 2016 12:51 PM


Hefty discounts during a robust Black Friday weekend helped boost November U.S. auto sales between 4 percent and 5 percent, automakers reported on Thursday, which could catapult results this year above a record high in 2015.

Industry analysts worried that the record discounts, also called incentives, were both artificially inflating demand and extending the auto sales boom ongoing since the 2008-09 economic crisis.

Bob Carter, senior vice president of automotive operations for Toyota Motor Corp’s U.S. sales arm, was upbeat nonetheless. “We have a very positive outlook on the U.S. economy over the next three years,” Carter told Reuters.

Each month, auto sales offer an early snapshot of U.S. consumer spending.

Mustafa Mohatarem, chief economist at General Motors Co, said “the U.S. auto industry is well positioned for sales to continue at or near record levels into 2017.”

Brian Johnson of Barclays said an expected rise in interest rates and a tightening of easy credit may pressure sales in 2017. "Perhaps these headwinds are offset by a stronger economy, ultimately leading to a continued plateau" for sales, rather than the "eroding plateau" Barclays now forecasts, he said in a research note.

The robust sales helped drive up automaker and auto dealer shares. On Thursday, both GM and Ford Motor Co jumped 6 percent, and leading auto dealer group AutoNation Inc  advanced 4 percent.

Market leader GM's sales rose 10.2 percent to 252,644 new vehicles in November. GM said the average selling price of its vehicles in November in the U.S. market was nearly $35,800, about $4,000 higher than the industry average.

GM reported lofty sales for its big SUVs and pickup trucks, which are higher priced than sedans and other passenger cars.

For the industry, GM expects November sales at 17.9 million on a seasonally adjusted annualized sales rate, which would be short of an annualized rate of 18.25 million reported in November 2015.

Ford U.S. sales chief Mark LaNeve said on a conference call that even though oil prices may be on the way to $60 per barrel after OPEC cut production quotas, consumers will still favor SUVs and pickup trucks. He said their fuel economy has improved since the last time oil prices spiked about eight years ago.

Fiat Chrysler Automobiles NV's sales ran counter to the prevailing trend, dropping 14 percent from last November. The Italian-American automaker was forced to restate past sales figures earlier this year, bumping up last November's count by 13,000 vehicles. Its U.S.-traded shares added 0.3 percent.

Toyota narrowly outsold Ford Motor Co, by fewer than 100 vehicles. Ford sales rose 5 percent, outpacing expectations, while Toyota nearly matched estimates with a 4.3 percent gain over the year earlier.

Usually, Ford is No. 2 in U.S. sales behind and Toyota is third.

Nissan Motor Co beat expectations with a 7.5 percent rise in U.S. sales to 115,136 vehicles.

Two more selling days last month made comparisons to year-ago sales easier to top, but the annualized sales rate was more difficult to match.

© 2018 Thomson/Reuters. All rights reserved.

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Thursday, 01 December 2016 12:51 PM
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