February will likely prove to have been an upbeat month for car sales in the U.S., despite surging oil prices that threaten to stall demand for larger vehicles, including profitable full-size pickups and big sport-utility vehicles. Major automakers are scheduled to release February sales numbers on Tuesday, and analysts expect the reports will show monthly sales improved 20% compared to a year ago, as consumers continued to warm to the slowly improving economy.

The data are expected to show that deliveries of new cars and light trucks, at a seasonally adjusted annual rate of 12.4 million units, were just slightly below the 12.6 million recorded in both December and January, Bloomberg News reports.

In a potentially worrisome trend, however, at least one big automaker increased spending on incentives to help move inventory off dealer lots. General Motors (GM) far outpaced most of its rivals in increasing rebates and offers of low-interest financing, the kind of deals that help drum up interest among consumers and motivate them to buy.

Incentives can be problematic for automakers because they eat into profits and can reduce trade-in values. Still, GM may be hedging its bets by offering the generous deals to boost market share.

GM Spends Money to Make Money


"Unlike GM of the past decade, the new GM's increased incentive spending has been well-calculated," says Jesse Toprak, senior analyst at TrueCar.com, an online price guide. Toprak estimates the automaker's 10% boost in incentive spending helped GM sell 30% more cars in February than it did a year ago. That would be a favorable formula.

As a result of GM's incentive splurge, Edmunds.com estimates the Detroit-based automaker's share of the domestic market rose to 20.7% in February, "up a couple of percentage points from a year ago but still down from January." For the month, GM is expected to sell about 194,000 vehicles.

Edmunds forecasts that GM spent nearly $3,860 in incentives in February to sell each vehicle. That's higher than in January and "up significantly from February a year ago," Edmunds says. By contrast, the average industry incentive fell to $2,530 for each vehicle sold in February, down about 4.8% compared to a year ago.

According to the average of five analysts polled by Bloomberg, GM sold about 36% more vehicles in February than it did a year ago. Only Nissan Motors (NSANY), which also boosted incentive spending, and Toyota Motor (TM) came close to matching that increase, with projected monthly sales increases of 27% and 29%, respectively, compared to February 2010, according to Edmunds.

Toyota Bounces Back from Recalls


Toyota's sales surged in February despite another recall involving unintended acceleration in Toyota and Lexus vehicles. The world's largest automaker announced last week it was recalling 2.2 million more vehicles to fix carpet pads and floor mats that can cause the vehicles' gas pedals to become jammed.

Toyota's sales may have been helped by the release of a report by the National Highway Traffic Safety Administration that absolved Toyota's vehicle electronics as the source of the sudden and uncontrollable acceleration problems. The report, issued jointly with NASA, concluded that sticky gas pedals and bulky floor mats, for which Toyota has already issued recalls, caused the problems.

Toyota's surge comes as the Japanese company continues to struggle with numerous recalls -- and the resulting damage to its image and reputation -- and aging models. For example, Toyota's popular Corolla, last redesigned in 2008, no longer competes well against more recently updated models such as the Chevrolet Cruze, Hyundai Motor's Elantra or Ford Motor's (F) Focus.

Though the automaker plans a number of new product introductions this year, "Toyota can't start rolling out new products fast enough," says Michelle Krebs, Edmunds.com senior analyst.

For Chrysler, Less Bang From Incentives

The company's combined woes allowed Ford to overtake Toyota as America's No. 2 automaker last year. Ford's momentum has continued in the new year, with forecasts showing the Dearborn, Mich.-based company handily outselling Toyota in February -- selling 152,000 units to Toyota's 129,000, according to Edmunds.

Chrysler Group, run by Italy's Fiat, is the only automaker that matched GM in incentive spending last month. But forecasts show the Auburn Hills, Mich., company got less bang for its buck, with sales increasing just 4% to about 88,000 vehicles.

Rounding out the top six U.S. automakers, Edmunds predicts Honda Motor (HMC) sales rose about 16% to about 94,000 units compared to a year ago, while Nissan likely outsold Chrysler, ringing up sales of about 89,000 vehicles for the month.





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marine1942

Does this mean Government Motors will not need the huge tax break Obama gave them ????

February 28 2011 at 5:41 PM Report abuse +4 rate up rate down Reply
primeflow

When are people going to learn.

February 28 2011 at 5:40 PM Report abuse +4 rate up rate down Reply
ultraz2

Soon because of surging oil prices, sales of the auto industry bread and butter-trucks ,will be hit hard. Look for auto stocks to plummet as a result.

February 28 2011 at 4:05 PM Report abuse +4 rate up rate down Reply