Editor's note: A previous version of this story incorrectly gave the last month in which U.S. light-vehicle sales exceeded 1 million units. That last happened in August 2008.
Analysts and dealers say U.S. sales cant sustain rates that have nearly drained the nearly $3 billion in cash-for-clunkers funding in just two months. But how far sales will fall is anyones guess, they say.
Any time there is any incentive like this, there is a payback. The question is how much? said Jeff Schuster, an analyst with market research firm J.D. Power and Associates.
U.S. light-vehicle sales hadnt seen a monthly sales rate of more than 9.9 million this year until the cash-for-clunkers program launched in July, sparking an 11.1-million-unit rate. Most analysts say demand was even higher this month. August sales rate predictions include J.D. Powers 12.2-million-unit forecast and market analysis firm IHS Global Insights projection of 13.7 million units.
But consumers had to finish cash-for-clunkers deals by 8 p.m. EDT Monday. So dealerships may be quiet for the rest of August -- and the next few months -- unless government or manufacturer incentives can build on cash-for-clunkers demand, said Jesse Toprak, vice president of industry trends and insights for consumer pricing site TrueCar.com.
Its a lot less costly to continue the momentum than to build a new one, Toprak said.
If such incentives dont keep consumers in showrooms, Toprak said September sales wont hit the 1-million-unit mark, as analysts forecast August sales will do for the first time since August 2008. And the sales rate could fall at least 20 percent from August, Toprak said. He said he did not think the sales rate would likely exceed 10.5 million units in September.
But the drop might actually recover nicely, so long as the stock market and economy continue to improve, he said.
Precedents from the past
After the other major incentives this decade -- General Motors Keep America Rolling in 2001 and Detroit automakers employee pricing deals during the summer of 2005 -- the sales rate leveled off to pre-incentive levels.
I think that youll see a pretty sharp drop-off, but then a gradual increase over time as people have to replace vehicles, said Andy Shapiro, an automotive advisor with Casesa Shapiro Group. I think the program shifted the timing of vehicle purchases. But it illustrated that there is demand out there, certainly at a subsidized price.
Dealers like Chris Haydocy, a Buick-Pontiac-GMC dealer in Columbus, Ohio, might not complain too much about lower sales rates -- for a few weeks, at least. New vehicles arent coming from the outgoing Pontiac brand, and Buick and GMCs 2010 lineup could take weeks to arrive, Haydocy said. So he is glad he still has 65 vehicles left on his 300-unit lot, he said.
Weve had many customers come by and ask if we were one of the phased-out dealers just because of our lack of inventory, he said.
After the rush on his dealership during late July and early August, Haydocy turned down some cash-for-clunkers deals.
Wed rather keep the cars on the lots for another couple of weeks or months to show that we are still in fact open, he said, adding the dealership also avoided paperwork headaches that way.
Automakers increased production will at first serve to replenish empty dealer lots, J.D. Powers Schuster said. But the factory ramp-ups, which many companies instituted because of cash-for-clunkers sales, could come too late. Inventories could swell again if demand stays low, he said.
That could create a rough couple of months, he said. I dont think its going to be ugly, but theres a big risk out there.
As of this morning, dealers had filed for $2.77 billion in cash-for-clunkers reimbursements. They have until 8 p.m. EDT tonight to request repayment for the vouchers of up to $4,500 consumers got when they traded in gas guzzlers for new vehicles with better fuel efficiency.