U.S. new vehicle sales seen rising in June


By Michael Ellis

DETROIT, June 26 (Reuters) - Cash rebates of up to $4,000 and low interest rates will help boost U.S. new car and truck sales in June by 1 to 2 percent above May's levels, analysts said.

Sales of cars and light trucks are expected to range between a seasonally-adjusted annual rate of 16.3 million to 16.5 million in June, up from May's 16.1 million, according to a survey of analysts by Reuters.

June sales, scheduled to be reported on July 2, could also top last June's 16.3 million rate. Last month was the first time this year that sales topped the year-ago levels, as the Iraq war, the sluggish economy and the weak stock markets have kept many consumers out of auto dealerships.

John Middlebrook, General Motors Corp.'s head of advertising and marketing, suggested that sales could be slightly weaker, about the same as the year-to-date rate of about 16 million. However he cautioned that last-minute incentives could push it higher in the final week of June.

GM has been leading the automotive industry in sales incentives, offering up to $4,000 cash back on select models or interest-free financing on loans of up to five years.

"We're pushing for market share and doing what we can to get it," Middlebrook told Reuters in an interview this week. "Nobody wants to give up anything. It's a dogfight."

Other automakers have also stepped up their incentives, which averaged $3,450 per vehicle from each automaker in the first two weeks of June, up from $2,179 in June last year, according to CNW Marketing Research.

GM and Ford Motor Co. both posted strong sales in June last year, and could have difficulty matching those results, while Chrysler may have stronger results, analysts said. Foreign automakers have steadily gained market share this year due to their new sport utility vehicles.

DaimlerChrysler AG surprised the market earlier this month when it said that, due to the high costs of incentives, its Chrysler unit would post a loss of about $1 billion in the second quarter. GM and Ford, however, have since reasserted their profit targets.

Some automakers have been able to recover part of those incentives as consumers used the spare cash to buy more expensive vehicles, which typically have higher profit margins. According to CNW, the average sticker price of a new vehicle rose to $27,547 in the first half of June, up from $26,002 in June last year.

"A lot of consumers are taking a big chunk of their incentive dollars ... and they're upscaling the car they select," Art Spinella, president of CNW, told Reuters.

As ever-higher incentives have lost their impact, automakers have turned to more creative means to attract consumers. Mitsubishi Motors Corp. said it will offer $100 to anyone who tests drives a new Mitsubishi and decides to buy a rival vehicle.

To boost earnings, Detroit automakers have been building more cars than they're selling, resulting in growing inventories of unsold vehicles. Automakers count earnings from vehicles when they are delivered to dealerships and not when they are sold to consumers.

Those high inventories could prompt automakers to cut their third quarter production estimates when they report sales next week, analysts said.



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