Auto industry incentives up 71% in October

DETROIT -- Record U.S. auto industry sales in October came at a heavy price for automakers, as the value of interest-free loans and other incentives rose 71 percent over the same month a year ago.

The average value of rebates, cheap loans, and other incentives per vehicle rose to $2,261 in October from $1,326 in October 2000. As they have all year, Detroit's Big Three led the parade, offering consumers an average of $2,740 per vehicle compared with $1,640 a year ago.

While incentives usually pile up between September and October as automakers roll out new model-year vehicles, this time the Big Three's incentives rose 9 percent month-to-month, continuing a year-long trend of growing discounts.

But foreign automakers also piled on the deals in October, after resisting the push for sharply higher incentives much of the year. European automakers more than doubled their spending to $1,690, from $780 last October, while Asian automakers added about $500 per vehicle for an average of $1,200.

The increase came even though many foreign automakers did not match the zero- and low-interest offers from Detroit.

"They must be doing other programs that are costing them," said analyst Saul Rubin with UBS Warburg. "They need to keep up with the Big Three."

October sales set an all-time record, hitting 1.7 million vehicles, thanks to the zero- and low-interest loans offered by General Motors, Ford Motor Co. and the Chrysler side of DaimlerChrysler AG. All three have extended their offers to mid-November in an attempt to prop up sales.

But that sales boost likely pulled ahead an unknown number of sales from the next few months. Industry executives estimate that 150,000 to 500,000 vehicles that would have otherwise been sold between December and April rolled off the lot in October instead.

Despite the massive sales, the Big Three have not changed their production estimates for the quarter, which analyst John Casesa said was a sign that automakers are bracing for sales to fall when the loan offers end.

Copyright 2001 Reuters Limited. Click for restrictions.

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