Automakers Expected to Boost Incentives to Drive Summer Sales

car sale
car sale

June proved to be a disappointing month for many automakers as sales fell by double digits from May levels. To get sales accelerating again, manufacturers are expected to unleash a new round of incentives, aimed at moving new cars and trucks off well-stocked dealer lots.

Such incentives, which take the form of low-rate financing, cash rebates and other promotions, have been dolled out liberally in recent months by Toyota Motor (TM) in its effort to win back cautious consumers, following its massive safety recalls of nearly 8 million cars in the U.S. Toyota has, for example, offered zero-interest financing for up to five years on most models of its popular Camry family sedan.

The programs have helped. After falling from previous year's levels in January and February, Toyota's U.S. sales rebounded in subsequent months, even as the world's largest automaker has continued to weather additional recalls.

Ford Motor (F), General Motors and, to a lesser extent, Chrysler Group have been less generous, instead able to entice customers with new designs and improved quality. But signs of a weakening economy have many Americans sitting on the fence when it comes to big purchases. So the Big Three, along with Honda Motor (HMC), Nissan Motors and other Asian automakers, will likely join the ranks of Toyota to lure customers into showrooms.

Go Slow Growth

The industry is still on track to sell more cars than last year, with a seasonally adjusted annual rate in June of about 11.1 million units, according to AutoData. That's substantially better than the 9.7 million estimate in the same month last year, but way off the 16 million to 17 million units annually the U.S. auto industry regularly pumped out earlier in the decade.

As bad as sales were last year, the summer of 2009 proved to be a busy one for many dealerships as customers scrambled to take advantage of the federal government's short-lived "cash for clunkers" program, which offered rebates of up to $4,500 to consumers who traded in gas guzzling vehicles.

Absent government stimulus, however, the industry this summer must rely on its own efforts, which may put consumers back in the driver's seat, at least when it comes to angling for a bargain on a new car or truck.