Incentives, Sales Down

This will be another strong year for auto sales by historical standards, with a lot of new product for choosy buyers.

The year also will further confirm that the cross/utility vehicle arguably is developing into its own vehicle type and is not just a flash-in-the-pan growth segment.

For manufacturers, competition will be tougher, and it appears auto makers — mainly the Big Three — will not be as generous as in the past with market incentives.

General Motors Corp., the market leader, appears serious about lowering production, rather than relying on bigger incentives, as a way to clamp down on excess inventories. That will relieve incentive pressure on other manufacturers.

That said, the economy is expected to grow at a solid rate but not enough to spur new growth in auto sales without the huge rebates and low-interest financing that have dominated the last three years.

That should be a market-share boon for companies with newer and exciting products, the Chrysler Group for example, or auto makers with a solid reputation for quality and value, such as Toyota Motor Corp.

If the big auto makers such as GM and Ford Motor Co. show restraint on incentives in 2005, Ward's expects the negative impact on industry volume to more than offset the positives and result in a small decline in sales this year from 2004.

Ward's forecasts light-vehicle sales to total 16.75 million units in 2005, compared with 16.86 million in 2004.

The year should be more even on a seasonally adjusted basis than has been the market norm the last three years.

As a result of aggressive production schedules building up stockpiles, sales from 2002 to 2004 have been dominated by upward spikes in the third quarter to get rid of old model-year vehicles, then a surge at the end of the year to shore up final numbers and alleviate burgeoning inventory.

That trend likely will occur again in 2005 because inventory is expected to remain high heading into summer, but not as pronounced as in recent years.

CUVs will continue as the hot segment, sucking market share away from midsize and luxury cars, SUVs and minivans. Of 20 all-new entries this year, seven will be CUVs.