Honda's John Mendel says there is a chance that automakers will beat last year's record sales.
Manufacturers are eager to roll out new models this fall and even adding more capacity in an effort to gain an edge over rivals.
But they are also facing a highly competitive market where manufacturers are being tempted to raise incentives to protect market share, noted Stephanie Brinley, an analyst with IHS Automotive.
“The market is going to get more competitive and we will see if (companies) fall back into their old practices,” she added. “The easy growth is gone.”
Last month, Fiat Chrysler Automobiles N.V. got some attention when sales of the Ram 1500 increased 29% and edged out the Chevrolet Silverado in total sales. Sales of the Silverado, on the other hand, dropped 15.5% and sales of the Ford F-150, the segment leader, dropped 3%. Analysts suggested Ram benefitted from a well-timed set of incentives.
Mark Wakefield, head of North American automotive practice at consultancy AlixPartners told Reuters that demand for pickup trucks remained strong in part because of low gasoline prices, despite the September dip for the biggest sellers. He also noted that September 2015 sales had been extremely strong, at an annualized rate of 18 million vehicles.
Wakefield said the market has shifted to one of “push” from manufacturers rather than “pull” from consumers, with discounts of just over 10% of the average selling price of new vehicles for the last several months.
Volvo CEO Lex Kerssemakers said the maker is looking to continue its growth that it has enjoyed in 2016.
Meanwhile, Autodata Corp showed total industry sales at 1.44 million vehicles, down 0.5% for a seasonally adjusted annualized rate of 17.76 million from 18.05 million in September 2015. The number, however, reflect what Honda’s John Mendel described as a stable environment.
“Record third quarter results were fueled by several best-ever months,” said Dietmar Exler, president and CEO of MBUSA. “We expect this momentum to carry us into the final quarter, with continued strong performance in SUVs and dream cars.”
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“September was another successful month for Volvo in the US with the 15th month of consecutive sales growth, said Lex Kerssemakers, president and CEO, Volvo Car USA.
The fourth quarter of 2015 was strong, so the next several months will present difficult comparisons, Wakefield said.
Most analysts forecast a decrease in 2016 from last year’s record sales of nearly 17.5 million vehicles. But Mendel, who has been outspoken about the threat incentives pose to the industry, said he would not be surprised if the sales record was broken this year.
Overall, manufacturers have maintained held back on incentives.
Industry-wide spending for discounts increased $430 per vehicle from a year ago, Mark LaNeve, Ford’s vice president of U.S. marketing, sales and service noted. But J.D. Power, in a research note last week, estimated record September industry incentive spending. However, the average transaction price – the money consumers spend on cars – also continued to rise, according to Kelley Blue Book.
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“The new car market is no longer growing, which means automakers now have to measure success in terms of market share, transaction prices, incentive levels and profitability,” said Karl Brauer, senior analyst for Kelley Blue Book.
“In these areas most automakers are still doing quite well, as a market plateau above 17 million annual units leaves plenty of room for success. However, some manufacturers are already leaning heavily on incentives and/or fleet sales, which don’t contribute to long-term corporate health,” Brauer said.
Brinley said in a recent research noted circulated by IHS, “One way to get market share, is to cut prices or use incentives. It’s fairly simple. While growth appears to be stabilizing, the market remains a healthy environment for profitable sales.”
“Car sales continue to struggle, though newer products are reward with better performance. While SUV sales continue to grow overall, we can also see where newer entries are outperforming older models. In a competitive environment, product remains the first tool for increasing demands,” she added.
BMI Research, an arm Fitch Ratings Service, noted in recent research note that suppliers are continuing to invest in expanding production ahead of steady sales.
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“Investment will continue to come more in the form of expansions than new facilities as sales growth in North America starts to plateau. Suppliers will continue to be among the biggest spenders as the accommodate vehicle production increases,” the BMI report noted.