Even as U.S. auto sales are expected to finish the year at a fast pace, with demand possibly at its highest in November, Wall Street remains worried the industry could return to overly generous incentives that would eat into profits.
Economists surveyed by Reuters see the annual sales rate for U.S. new-vehicle sales in November finishing at 15.6 million vehicles. And some analysts said the rate could top 16 million, which would mark the strongest pace of the year.
Monthly sales are regarded as an early indicator of the U.S. economy’s health. The industry has held up better than the broader economy because of easier access to credit and consumers’ need to replace aging vehicles, which now average more than 11 years.
But some analysts are worried about rising incentives biting into companies’ profit margins. Morgan Stanley analyst Adam Jonas said General Motors Co executives at the LA Auto Show last week agreed “there are some warning signs brewing in industry sales momentum and discipline” with incentives heating up.
RBC Capital Markets sees industry incentives up 4 % in November over last year, and analysts and industry officials cited generous or rising offers from Ford, Nissan, GM and Toyota. Ford’s incentives on its F-150 pickups were up 12 %, according to Barclays and Buckingham Research Group.
The U.S. auto industry is scheduled to report November sales on December 3, and analysts who closely follow the industry see sales rising in a range of 3.6 to 6.8 % as demand returns to “normal” after the 16-day government shutdown hurt October results.