'06 Starts with Fewer Vehicles On Dealer Lots

U.S. light-vehicle sales get off to a sluggish start in 2006, as the market share leaders cut back on incentives and the industry faces overall lower inventory than a year ago.

The two market leaders, General Motors Corp. and Ford Motor Co., are trying to reduce incentives, particularly on newer products, and their inventory levels are lower than year-ago.

Inventory is much lower at GM, in particular. It started the year with 1.023 million light vehicles on dealer lots or in transit — 16.1%, or nearly 200,000 units, below year-ago. Ford entered the year with about 763,000 units in stock, 7.7% below year-ago.

Even though the rest of the industry is expected to outperform year-ago results, it will not be enough to offset the drop at GM and Ford.

The negative impact of lower inventory and incentives at GM and Ford should lessen as the first quarter progresses and give way to solid second-quarter results, as long as the economy cooperates.

Industry inventory will continue to rise through the end of the quarter, matching, and possibly surpassing, year-ago figures, which at the time were deemed too high.

However, this time, the source of the rise will be non-Big Two manufacturers, including potential double-digit increases at Toyota Motor Sales U.S.A. Inc., American Honda Motor Co. Inc., Nissan North America Inc. and Hyundai Motor America.

The Chrysler Group, which will be ramping up production of its new Dodge Caliber small car, also likely will end the first quarter with inventory above year-ago.

Meantime, U.S. auto makers ended December with 3.52 million units in stock, 6.5% — some 245,000 units — below year-ago. Days' supply was 65 vs. year-ago's 67.

Inventory is forecast to end January at 3.75 million units, 3.5% below year-ago. Days' supply is forecast at 86, vs. January 2005's 88.