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U.S. Auto Sales “Tracking Very Strongly”

Incentives help key makers, notably Toyota.

by on Mar.15, 2010

Auto sales are trending up an incentives, like those on the 2010 Toyota Corolla, get much of the credit.

Spurred by some of the heftiest incentives in some time, industry observers report seeing significant signs of growth in the U.S. auto industry during the first part of March.

At least one well-regarded analyst is forecasting that demand could reach an annualized rate of 13 million for the month overall should the pace continue.  That would be one of the best months the American market has experienced since the recession began, in late 2008, excluding the impact of last year’s Cash for Clunkers program.

“U.S. auto sales ar tracking strongly,” said Deutsche Bank analyst Rod Lache, in a new report, adding that “several factors appear to be contributing to the uptick.”

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Among the most significant forces in the market: an increase in incentives spending by makers like General Motors and Toyota.  The Japanese makers has traditionally been reluctant to put much money on the hood, but heeded dealer calls for an incentive campaign after the disastrous, double-digit decline in sales, last month.

In an interview with TheDetroitBureau.com, last week, Toyota Sr. Vice President Don Esmond said the impact of the new cash-back deals has been strong and immediate.  For the first ten days of March, “we’re already up over 40% from where we were last year and double what we did last month.”

Analyst Lache estimated Toyota will not only see an increase in sales but a significant bump in retail market share, forecasting it will reach around 20% for March, compared with just 14.8% last month and 17.4% in January, when it announced the recall of 2.3 million vehicles for sticking accelerators – and halted sale of eight affected models while also temporarily idling the five North American plants that build those vehicles.

Despite boosting its own incentives, however, the Deutsche Bank analyst said dealer data show “GM does not appear to be performing particularly well.”

If true, observers will be watching the troubled domestic maker closely.  GM has undergone a number of management shake-ups in recent months.  The most recent found marketing efforts stripped from Susan Docherty, the senior executive who continues to oversees sales, and turned over to Mark Reuss, GM’s new president of North American operations.

Analyst Lache noted Ford also appears to be tracking ahead of his full-year market share forecast of 16%, but he cautioned that the maker has been benefitting from recent increases in fleet sales. It is considered unlikely the pace of that market segment will continue throughout 2010.

While the uptick in sales could be a positive sign, industry analysts are warily watching for any indication that manufacturers could be returning to their bad old ways, wiping out billions in potential profits through another incentives war.

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