Car and light truck sales should reach 1.5 million in July, about the same as in July a year ago. The momentum should continue in August, particularly due to large discounts on the best-selling cars. Industry experts worry that these deals have hurt manufacturers’ profits.
The industry leader in sales, Ford Motor Co.’s (NYSE: F) F-150, sold 395,204 in the first half. The deal available for the truck is 0% financing for 60 months and $1,000 “cash back.”
The second best-selling vehicle in the first half was General Motors Co.’s (NYSE: GM) Chevy Silverado, which sold 373,652 for the period. The discount is very steep on the 1500 Crew Cab LT All Star four-wheel drive version. The deal on this is 20% off manufacturer’s suggested retail price (MSRP), which is extremely aggressive.
The Fiat Chrysler Automobile N.V. (NYSE: FCAU) Ram sold 231,405 units in the first half. The 1500 Big Horn Crew Cab carries a 0% for 72 months and a discount of $6,260.
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Toyota Motor Corp. (NYSE: TM) sold 199,760 Camry models in the first half. It carries $2,500 cash back in some markets for 2016 models.
The next best-selling car is the 2016 Honda Motor Co. Ltd. (NYSE: HMC) Civic Sedan SVT LX, which sold 189,840 cars in the first half. It is not much of an offer at all, with a lease of $178 per month for 36 months.
Toyota sold 182,193 Corolla models in the first half. Only $1,500 cash back.
Nissan sold 172,695 Altima models. In some local markets, the 2016 carries 0% financing for 72 months, with no payment for the first 90 days.
Honda sold 169,354 Accords in the first half. In some markets, its best deal is 1.9% for 37 to 60 months.
Toyota sold 169,500 RAV4 models. In some markets it is sold with 0% financing for 60 months.
Without a detailed look at manufacturers’ financials, it is impossible to tell the effect of these price cuts on profitability. Some cars have large margins to start with. Others may have thin enough ones that discounts drive losses.
If the industry is worried about incentive wars, it only needs to look at deals on the best-selling cars and light trucks. The battle is on, and if sales falter, it may get much worse.
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