Automakers seek to boost Nov. sales with Black Friday, holiday promotions
DETROIT -- Automakers in the U.S. are ramping up holiday sales promotions ahead of Black Friday, aiming to clear out bulging inventories of unsold cars and dispel investor doubts about consumer demand.
Detroit automakers need a strong year-end sales push. They are sitting on hefty inventories of unsold sedans, compact cars and sports cars as consumers shift to pickup trucks and SUVs.
And Thanksgiving weekend is crucial for U.S. sales, generating about 25 percent of total November vehicle sales, J.D. Power and LMC Automotive said in a report today.
"We are seeing a tougher pricing environment, higher levels of discounts," Ford Motor Co. CEO Mark Fields said in a recent meeting with journalists.
November U.S. sales are projected to rise about 5 percent on an unadjusted basis to 1.38 million vehicles, but that's with two more selling days than November 2015, according to today's report from J.D. Power and LMC Automotive. When adjusted for sales days, sales would actually fall 3.4 percent, according to the report.
The annualized sales rate is projected to fall to 17.9 million vehicles from 18 million in October and from a year ago, the report said. Automakers will report November sales on Dec. 1.
"It is important to note that in absolute terms vehicle sales remain close to record levels while transaction prices are at record highs," Deirdre Borrego, J.D. Power senior vice president, said in the report. "However, these results are being driven in part by elevated incentive levels, which represent a meaningful risk to the long-term health of the auto industry.”
According to J.D. Power and LMC, U.S. incentive spending so far in November is $3,886 per unit, up 15 percent from $3,374 in November 2015. This is the second-highest level ever behind the record $3,939 set in September, the report said.
Inventories on par
Total U.S. inventory on Nov. 1 stood at 73 days' supply, up from 69 days a year ago, according to Automotive News data.
U.S. car inventories rose 13 days to 76 days' supply during October while truck inventories grew six days to 71 days, according to Automotive News data.
Total U.S. inventories on Nov. 1 have ranged from 69 to 77 days' supply over the last five years. Automakers typically ramp up inventories this time of year to stock showrooms with new model-year vehicles.
Ford kicked off its Black Friday sales promotions in early November, after reporting an 11.7 percent drop in October sales.
Rivals have since followed suit. General Motors' GMC truck brand is promoting "Black Friday All Month Long" with discounts of as much as 20 percent off list prices for pickup trucks.
Luxury automakers usually join the fray in December. Toyota Motor Corp.'s Lexus brand began touting its annual "December to Remember" deals ahead of Thanksgiving weekend, offering 0.9 percent, five-year loans or $1,000 off on its compact IS 300 sedan in certain markets.
GM this week began offering markdowns on the Chevrolet Corvette sports car through retailer Costco Wholesale Corp.'s car-buying club, the first time the Corvette has been offered through the discount retailer's car buying service.
At the start of the month, there were 122 days of Corvette inventory, up 51 percent from a year earlier and nearly double the level automakers consider ideal, according to Automotive News data.
Like other retailers, automakers use holiday-themed promotions to boost sales during the final two months of the year, and like Wal-Mart Stores Inc., Target Corp. and Amazon.com, automakers have steadily expanded the Christmas season over the past several years.
The concept of winter holiday sales is going global. In China, automotive marketers target customers on Singles Day, Nov. 11, piggy-backing on promotions led by internet retailers such as Alibaba. Black Friday car deals came to Britain about six years ago.
A factor working in the automakers' favor is the advanced age, 11.6 years on average, of the U.S. fleet of 264 million vehicles.
It is unclear to what extent automakers will offer deeper discounts overall in the coming weeks or repackage existing deals with holiday bows.
J.D. Power data on new-vehicle discounts provided to Reuters shows that on average GM discounts grew 1 percent in October from a month earlier, to $4,700 per vehicle, while Ford's average discount fell 10.6 percent to about $4,400 per vehicle. FCA's October discounts were flat at $4,920 in October from September, according to J.D. Power. But the company offered $7,800 or more off its top-seller, the Ram 1500 pickup truck.
"Incentive levels are near record highs as a percentage of the selling price," said Jeff Schuster, lead forecaster for LMC Automotive, an automotive consultancy.
Philip Nussel of Automotive News contributed to this report.
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