US auto sales expected to drop in May on shortages

AP News
Posted: Jun 01, 2011 6:50 AM
US auto sales expected to drop in May on shortages

The U.S. auto industry hit a pothole in its recovery in May, as shortages of cars and a dearth of deals kept consumers home.

Automakers are expected to release May sales figures starting around 11 a.m. EDT Wednesday.

Analysts are expecting total sales of around 1.1 million cars and trucks, down 8 percent from April and down 4 percent from last May. The annualized pace of sales _ which shows what sales would be if they stayed at the same pace for the whole year _ is expected to fall below 13 million for the first time since January.

The shortage of Japanese cars after the March 11 earthquake is one reason for the slump. Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. curtailed production after the quake. While they had some vehicles in their inventory that sold in March and April, the product shortages were most acute in May. Honda said last week that it expects to return to near-normal production in North America by August. Toyota expects a return to 70 percent of normal production in North America this month.

But in the meantime, those companies are suffering losses. Car pricing site predicted Toyota's sales will be down 33 percent from last May, while Honda's will be down 21 percent. Picking up the slack are Korean automakers Hyundai Motor Co. and Kia Motors Corp., which were expected to see sales rise 43 percent.

Another issue was the lack of rebates, low-interest financing and other deals. Faced with dwindling supplies, Japanese automakers slashed incentive spending in May, and their competitors did the same. TrueCar said incentive spending last month hit its lowest level in nine years, at an average of $2,017 per car. That was down 29 percent from last May and 13 percent from April.

Still, there were some deals to be found, especially as the Memorial Day weekend approached. Nissan said it planned to ramp up its incentive spending late in May, since it had more inventory than Toyota or Honda. Toyota pledged to offer some deals of its own.

Analysts said the May drop-off was likely a temporary problem. Once production is back to normal, the sales recovery seen since the recession should resume.

"Demand is deferred, not destroyed. There are people who want to buy cars and are ready. They're just waiting for the deals," CEO Jeremy Anwyl said.