DETROIT -- The average price paid for SUVs, including incentives, fell in the third quarter this year, while unsold SUVs sit on dealer lots longer, according to data from the Power Information Network, an affiliate of J.D. Power and Associates.
Sales incentives across the industry have risen by 25 percent this year to an average of $4,667 for full-size SUVs and $4,203 for mid-size SUVs, according to industry tracking firm Autodata.
"That cuts into the profits of the manufacturers by an enormous amount," said Art Spinella, president of CNW Marketing Research of Bandon, Ore.
Average transaction prices for mid-size SUVs fell by $583 in the third quarter from year-earlier levels, while for full-size SUVs, prices dropped by $745, according to Power Information Network.
The trend is particularly troublesome for General Motors and Ford Motor Co., whose SUV lineups are aging and who dominate the full- and mid-size SUV market. Traditional SUVs, built on a truck frame, have lost out to new entries, such as the Chrysler 300 sedan, and the growing number of crossovers with car-like ride and gas mileage but with roominess similar to an SUV.
GM last week reported the first loss for its automotive segment in about a decade, except for the third quarter of 1998 when strikes closed most of its North American plants.
GM's lineup of full-size SUVs, including the Chevrolet Tahoe and Suburban and the GMC Yukon, is entering its sixth year of production while competitors have newer models. GM's SUVs aren't scheduled to be redone until 2006, analysts said.
DOUBTS IN TEXAS
Ford's SUV sales have fallen sharply this year, including double-digit drops in sales of its large Expedition and Excursion SUVs.
Full-size SUVs sat unsold at dealerships for an average of 87 days in the third quarter, up from 68 days in the third quarter last year. The "days to turn" was nearly the same for mid-size SUVs -- 90 days vs. 70 days a year earlier.
"People are having second thoughts about buying trucks, even in Texas," said one analyst, who declined to be named. "The natural level of sales are wanting to slow, but GM isn't letting it. It's where they make all their money."
Rather than let its sales slip, GM has pushed its incentives higher, forcing the industry to follow or lose market share.
Ford, however, has benefited from climbing sales of its new F-Series pickup truck, but its dependence on the F-Series for profits could prove to be troublesome next year as it ages, Morgan Stanley analyst Stephen Girsky said in a research note.
"Ford is not entirely immune to GM's issues," Girsky said. "Ford's F-Series now represents about one-third of its sales in the U.S. and the product will be a year older next year."