DETROIT – Increased incentive spending by its top rival and the wrong grade mix had a negative impact on the Corolla’s U.S. sales in December, a top Toyota official tells WardsAuto.

The new-generation Corolla has been on sale for just four months, but deliveries in the past two months have declined, falling 3.8% on a daily-selling-rate basis in December following a 4.6% loss in November.

“(Honda had) $2,500 cash on a Civic last month plus a $3,000 stair-step, hit-your-number (dealer incentive),” Bob Carter, senior vice president-automotive operations for Toyota Motor Sales U.S.A. says in an interview during the 2014 North American International Auto show. “We chose not to participate.”

Carter says high inventory of ’13 Civics prompted the Honda incentive spree. “They had a massive ’13 problem, so they had to spend their way out of it.”

The Corolla is the most cross-shopped vehicle against the Civic and vice versa. The Civic and Corolla are the No.1 and No.2 best-selling compact cars in the U.S., with 336,180 and 300,167 deliveries, respectively, last year.

Carter says Toyota still is working out the kinks in the Corolla mix at dealers, noting buyers are demanding the well-contented S grade more than expected.

Despite the 2-month drop, Corolla sales closed out 2013 up 4.8%, and Carter expects more upside this year. “(Corolla) will be a growth car for us this year, without a doubt,” he says.