Automakers disappointed by June sales are extending discounts -- and in some cases modestly increasing rebates and enhancing loan terms -- on new cars and trucks to entice skittish shoppers.
Light vehicle sales rose just 14 percent in June from depressed levels in June 2009. And demand dropped from May to June, taking some momentum out of the recovery and dashing hopes for a stronger second-half rebound.
“We will see more generous incentives in July,” said Jessica Caldwell, senior analyst at Edmunds.com.
Edmunds estimates July average per-vehicle incentives will be at or above the $2,600 level in June, said Caldwell.
While inventories rose from July 1 compared to June 1 for most brands, they remain low by historical standards. That gives automakers room to be prudent with discounts, analysts say.
GM, Ford and Chrysler all started July with enough vehicles in stock to last 60 days or less at current selling rates, according to the Automotive News Data Center. Overall, the industry started July with a 54-day supply of vehicles, up from 48 days on June 1.
So Caldwell said consumers should not expect “rock-bottom pricing,” with the latest incentives or programs lasting into September, when most 2011 models will be on sale.
Another reason automakers won't be piling on the discounts any time soon: They have cut factory capacity and other costs enough that they can operate profitably at the industry's current sales levels.
Jeff Schuster, executive director of forecasting for J.D. Power and Associates, said incentive spending has been fairly flat since automakers eased back from generous deals in March. He estimates June incentives averaged $2,800 vehicle.
A sample of current offers and notable changes, compiled by the Automotive News Data Center:
• GM raised rebates on the 2010 Chevrolet Impala by $1,000 to $4,000, added another $500 on small 2010 pickups, and is now offering $1,000 cash back on select 2011 GMC and Buick crossovers and SUVs, including the Enclave and Yukon. Cadillac is now offering zero-percent financing on all loans for CTS, STS, DTS, and Escalade models.
• BMW AG lowered finance rates on some 2011 models from 3.9-5.9 percent to 0.9-4.9 percent. The offers expire August 31.
• Mitsubishi Motors Corp. raised cash rebates on the 2010 Endeavor to $4,000, from $3,500.
• Subaru lowered loan rates on 2011 Legacy and Outback models to 2.9-3.9 percent, from 3.9 percent to 4.5 percent.
• Toyota Motor Corp. continues to offer 0 percent financing for up to 60 months in various regions. In the Los Angeles area, 0 percent financing is available on the 2011 Camry and 2010 Corolla, Yaris, Prius, Venza, Tundra and Highlander.
Toyota also is offering customer cash rebates, from $500 on the Camry, Corolla and Yaris to $3,000 on the Tundra.
• Ford Motor Co. has extended its Ford and Lincoln sales events that run through Sept. 7. Lincoln's offers include free scheduled maintenance.
• Porsche, which has avoided incentives, is offering 1.9 percent financing through Aug. 2. on all models except the Panamera four-door sedan.
• Hyundai is offering cash rebates of $500 to $2,500 on the 2010 Accent, Sonata Elantra, Santa Fe, Azera, Tucson and Veracruz.
Cash rebates are also being offered on the 2011 Elantra Touring and Tucson. Some of the rebates have been sweetened.
Schuster said results from the July 4 holiday weekend will determine how aggressive automakers will be with new incentives. The last round of discounts expired July 6.
July is off to a better start than last month at Stewart Management Group Inc., which operates four Chevrolet stores in Michigan, Florida and Georgia, and a Toyota store in Hoover, Alabama.
“July is pretty good so far. June finished strong but the first three weeks were fairly slow," said owner Gordon Stewart. "We are so short of product in Chevrolet – dangerously short in Camaro, Malibu, Equinox and Silverados. But sales are strong for the Chevy and Toyota store.”
GM started July with a 56-day supply of vehicles, up from 47 days in early June. Ford had a 59-day supply of vehicles in early July, up from 50 days on June 1. Chrysler dealers have enough vehicles in stock to last 60 days, up from 49 days in early June.
Supplies also rose at Mitsubishi, Mazda Motor Corp., Nissan Motor Co., and Porsche AG. But inventories have dropped at Hyundai Motor Corp., Subaru, Suzuki and BMW.
“We are still sitting on low inventory levels," said Schuster. "There is not a huge need for a summer clearance, but counter to that we are in a bit of a stalled recovery.”
Schuster said automakers may pile on the spiffs because of a “desire to give the consumer a boost to come into the showroom.”
Because of weak June sales, J.D. Power will likely lower its 2010 estimate of 11.8 million sales by “a couple hundred thousands units unless July gives us a nice surprise,” Schuster said.
Jesse Toprak, vice president of industry, trends and insight for TrueCar.com, another shopping site, predicts incentives could rise as high as $3,000 per vehicle, up from an average of $2,870 in June.
“The retail performance in the marketplace (last month) disappointed most of the automakers,” said Toprak. “They will only be more eager to spend more money in July. We will see an across-the-board increase in spending.”
Toprak said despite the high number, rebate spending is “smarter,” than the post-2011 disaster rebates and cash-back frenzy. “It is a very much calculated science.”
Automakers are specifically targeting models and regions on which to spend, said Toprak: “They aren't spending like drunken sailors anymore.”
Chrissie Thompson and David Phillips contributed to this report