‘Crazy' spiffs, leap year lift Feb. sales

Automakers have consistently tried to come up with better ways to move the metal each month, but nothing works as well as extra selling days and tons of money on the hood.

Though most automakers won't report their results until the end of the quarter, those that did reveal their February U.S. sales last week saw big jumps — especially from their light-truck lineups — as two extra selling days and record February incentives worked their magic on the numbers.

The month's light-vehicle seasonally adjusted, annualized rate was 17.04 million, following a 17.07 million rate in January, according to estimates by Motor Intelligence.

Meanwhile, a surprise half-point rate cut by the Federal Reserve on Tuesday, March 3, to stave off a potential recession from the effects of the coronavirus has already resurrected one proven industry metal mover — 0 percent auto financing — and should help the industry weather what still may be trying times ahead.

All seven automakers that reported February sales were up for the month, led by Mazda's 19 percent jump. Hyundai-Kia, up 18 percent, and Subaru, up 5.3 percent, set records for February sales, while Toyota Motor North America was up 12 percent and had a record month with several of its light trucks. American Honda tallied a 4.2 percent gain, while Mitsubishi was up 13 percent and Volvo was up 18 percent.

Other automakers — led by the Detroit 3, German brands and Nissan Motor Co. — have chosen to shift from monthly U.S. sales releases to quarterly reports, which obfuscate their results during interim months such as February.

Even though the majority of the U.S. market did not report, analysts believe their numbers likely also gained from the leap-year calendar and larger incentives.

While the extra selling days were a calendar blip, higher incentives appear to have much greater staying power.

"Incentives are crazy right now," said Tyson Jominy, vice president of data and analytics at J.D. Power. "We are seeing Labor Day-like deals in February."

Indeed, J.D. Power and LMC Automotive said average industry incentives in February were tracking at $4,179 per vehicle — a $293 increase over the year before, the highest level ever recorded for February and on pace to reach as high as $5,000 per vehicle by the end of the year. ALG estimated average February incentives at $3,576, up only slightly.

The high incentives look to hold into March, analysts say, and could be buttressed even further by the return of 0 percent auto loans. Some of the previous-model sell-off incentives reported last month were already eye-popping — including Cadillac offering up to $20,000 on 2019 Escalade SUVs. And just days after the Fed's rate cut, Chevrolet began offering consumers 0 percent interest, 72-month loans plus cash on some versions of the Silverado 1500 pickup.The incentive spends may be justified as automakers and dealers attempt to wade through slowing economic growth, a volatile stock market, coronavirus jitters and the election season. Most analysts expect new-vehicle sales to slide this year against these headwinds and as rising prices make used and certified pre-owned vehicles more attractive to consumers.

"Uncertainty seems to be the buzzword for the auto industry right now, even if the causes change," said Jeff Schuster, president, Americas operation and global vehicle forecasts for LMC. "While we expect the light-vehicle market to decline further in 2020, the factors that play a part in that decline are numerous," including the coronavirus, the slowing U.S. economy and higher transaction prices.

Most analysts see 2020 volume dropping to 16.4 million to 16.9 million on lower retail and fleet deliveries, compared with 17.1 million in 2019.

"We've settled at a slower pace over the last few months, and our expectation is the new pace will continue this month and through 2020," said Charlie Chesbrough, Cox Automotive senior economist. "We are in the late stage of the sales cycle, and demand is weakening even though incentives are relatively high."