As U.S. auto sales roared ahead in October, so, too, did incentives, a development that is starting to raise some eyebrows in the industry.
On average, automakers doled out $3,104 in incentives per vehicle sold in October, according to TrueCar. That's an increase of 14 percent from a year ago and equal to 9.5 percent of the industry's average transaction price of $32,529.
That seems high, some analysts say.
October's strong sales were "clearly supported by incentive actions," Wells Fargo's David Lim wrote in a research note, adding that industry data suggest "sales are being 'purchased'" by the manufacturers.
That note of concern marks a shift from the environment automakers have enjoyed since the industry's recovery began in 2010. Over the past six years, consumers have been streaming into showrooms in search of replacements for their aging vehicles and lured by new models and new technologies.
Incentives have always been a part of the equation, but manufacturers haven't had to push discounts to drive volume higher.
Eric Lyman, vice president of industry insights at TrueCar, said the current level of incentives "is not something we are hitting the panic button on yet." But, he says, it's close.
If incentives continue to rise, they'll exceed 10 percent of average transaction prices, the point at which "they start to unravel value for the industry" and start pulling down used-car prices, residual values and new-car prices, Lyman said.
Automakers show no signs of easing up on discounting. Last week, Chevrolet kicked off a "Black Friday All Month Long" promotion offering hefty discounts on 2015 models: Select 2015 Cruze LTs, for instance, are offered for 20 percent, or $4,184, off the sticker price of $20,920, including shipping. The General Motors campaign counters Ford's "Friends & Neighbors" discounts on 2014, 2015 and 2016 models for the rest of the year.
Manufacturers play down the impact of the incentives, noting that transaction prices are still edging higher, and their profit margins remain healthy.
For the third quarter, for example, Ford Motor Co. reported an operating margin of 11.3 percent in North America, and GM said its North American operating margin was 11.8 percent. Toyota, Honda, Mazda and Subaru reported strong quarterly earnings.
Mark LaNeve, Ford's vice president of U.S. marketing, sales and service, said in a conference call that the company's new blitz packages discounts into a simple form for consumers but doesn't raise the level of incentive spending.
"Friends & Neighbors is a tactic," he said. "It doesn't in any way indicate the underlying level of incentives, which are not going to escalate from October."
Indeed, many of the "discount prices" available under the promotion, typically ranging from about 4 to 10 percent off the sticker price, are equal to what buyers are paying already.
Moveover, manufacturers note that the overall environment remains healthy, with rising sales, rising prices and many fully utilized plants. With just two months remaining, 2015 is on track for the highest U.S. sales ever. Volume need increase only about 3.0 percent in the final two months, compared with the same period last year, to push this year's total past the 17.4 million vehicles that were sold in 2000.
U.S. sales of new cars and light trucks climbed 14 percent last month, to 1.46 million vehicles. Sales of pickups, crossovers, SUVs, minivans and other light trucks increased 22 percent, aided by low fuel prices.
"Manufacturers with a strong light-truck portfolio -- FCA, Ford, GM and Toyota -- are maximizing production and availability of these products to take advantage of the appealing environment of low interest rates and gas prices," said Tom Libby, manager of industry analysis at IHS Automotive. "They know this situation won't last forever."
David Phillips and John Irwin contributed to this report.