May car sales dropped more than some analysts expected, prompting Chevrolet to immediately sweeten its consumer incentives — and other automakers may follow.
General Motors’ 18 percent sales fall caused most of the industry’s decline. Its sales drop was three times that of rival Ford’s, which came within only 6,000 vehicles of matching GM’s sales.
GM immediately announced sweetened Chevrolet incentives, including 0 percent financing for 60 months, beefy cash rebates and loyalty cash. The financing and up to $8,250 in cash is offered with some versions of the Silverado, a model which saw falling sales figures in May; meanwhile, rival model Ford F-150 had a sales hike. No-interest financing for 60 months and a $2,250 cash allowance are now offered for the Equinox, along with lease loyalty cash. Discounts of 20 percent off are on high-end versions of the Impala (amounting to up to $8,025), Sonic and Spark through June 15. Corvette Stingray owners and lessees can receive $2,000 in loyalty cash.
May vehicle sales further demonstrated the expanding schism between cars and sport utilities. Sales of the No. 1 selling vehicle segment — compact sport utility vehicles such as the Ford Escape, Honda CR-V and Toyota RAV4 — widened their margin over car sales. A segment adding more new entries — subcompact utilities, including the Buick Encore, Honda HR-V and Mazda CX-3 — posted a 36 percent gain. Small-to-large luxury sport utilities also saw healthy sales hikes.
Generally, prospering vehicle categories offer the smallest incentives and the least amount of bargaining room. Conversely, sales of small, medium and large cars of the luxury, nonluxury and performance varieties suffered double-digit sales drops. Hybrid and other alternative energy cars saw the biggest decline — down 36 percent. Slumping vehicle categories are those in which consumers will enjoy the biggest incentive offers and the most wiggle room for negotiating a price.
RAM had the biggest May incentives at $5,637 per truck, up $1,600 from April. The Chrysler brand ranked second with nearly $5,000 per car. Looking at luxury brands, Lincoln, Buick and Cadillac increased incentives to about $6,000 per vehicle.
In contrast, new models being launched have little inventory and are sold quickly when they arrive at dealerships. Among them are Jaguar’s new F-PACE, its first sport utility vehicle, the Chrysler Pacifica minivan that just went on sale, and Cadillac’s new CT6 sedan and XT5 SUV. The Honda Pilot sport utility and the freshened Toyota Tacoma midsize pickup truck (another hot segment) are selling fast, as well.
Inventories and, subsequently, incentives have been steadily rising in recent years. Incentives typically grow in the summer months as automakers clear dealer lots for the new fall models. Summer, combined with May’s tepid car sales, will likely lead to richer incentives and more bargaining power for consumers.