Incentives Buoy Sales to 12.5 Million SAAR in Early March, Edmunds.com ReportsBy Michelle Krebs March 11, 2010
Hefty incentives offered by Toyota to rejuvenate sales and market share -- and copied by some competitors - sent U.S. industry sales soaring in the early going of March, according to Edmunds.com's forecast.
In the first eight days of March, the Seasonally Adjusted Annual Rate (SAAR) of U.S. sales climbed to 12.5 million units, the highest level since September 2008, excluding August 2009 when Cash for Clunkers was at fever pitch.
"Generous incentives from Toyota and General Motors have stimulated this boom," Edmunds.com Senior Analyst Ray Zhou, PhD. "But we anticipate that it will cool off, and that the month will end closer to 11 million or so."
Indeed, incentives typically work best in the early going and fizzle out as time wears on, noted Edmunds.com Senior Analyst Jessica Caldwell. Still, 11 million or so represents a vast improvement over the 9.7-million SAAR of last March.
Toyota Regains Ground
Clearly, Toyota is proving to be the winner in the March Madness of incentives that it tipped off on March 2 to recoup ground lost in the past two months from recalls and stop-sales orders on some models.
Toyota Division General Manager Bob Carter, in the February sales call, described the campaign as "the most far-reaching (incentive) program that Toyota has ever conducted." Running March 1 to April 5, Toyota's incentives include no-interest loans for up to five years and bargain-priced leases on most Toyota brand models that cover 80 percent of its volume.
And the massive incentive program is working. Toyota Senior Vice President Don Esmond told suppliers this week that North American sales of Toyota-brand vehicles surged about 50 percent in the first eight days this month, The Associated Press reported. Edmunds.com predicts that when the books close on March, Toyota's sales will be up 30 percent for the month over last March.
Edmunds.com's analysis of transaction data shows Toyota's daily retail sales rate in the first eight days of March was about 47 percent higher than last March and 71 percent higher than February. Toyota's retail market share was running about 16.8 percent in early March, up from 12.8 percent in February when Toyota's share hit its lowest level isince 2006 but also up from its 15.2 percent last March.
Edmunds.com CEO Jeremy Anwyl notes the incentives combined with "the huge reservoir of goodwill" Toyota has built is minimizing the damage of its global recalls of more than 8 million vehicles. Indeed, a Gallup survey conducted in late February showed 74 percent of Toyota owners have not lost confidence in the company's vehicles; 82 percent think they are safe.
The win, however, comes at a price to Toyota. A Tokyo-based analyst quoted by Bloomberg News, forecasts Toyota's incentives on spending will total $1.1 billion in added costs. Another analyst told Bloomberg that the incentives, higher advertising costs, lower sales and scaled-back cost cutting will cut into Toyota's profits, and may result in an operating loss for the fiscal year that ends March 31.
Other Early Winners - and Losers
Chevrolet, which matched Toyota's no-interest financing on several models, was another winner in the incentive war, at least in the early going of the month. Much improved weather in Chevrolet's key heartland markets helped, and GM is cranking up production on hotsellers like Chevrolet's Equinox.
Chevrolet's retail share climbed to 12.9 percent in early March, up from last March's 11.4 percent and up from February's 11.3 percent, according to Edmunds.com's analysis.
Ford clearly benefited from Toyota's woes in February by posting total sales not only higher than Toyota's but also surpassing GM's. But, despite expanded incentives to counter Toyota's, Ford brand's retail share fell in early March to 11.7 percent, down from last March's 12.4 percent and February's 12.5 percent.
Honda, which had publicly said it would not try to capitalize on Toyota's woes but is offering some good deals but not a comprehensive campaign, didn't gain from Toyota either in early March. Honda's retail share dropped to 9.2 percent in early March, down from last March's 11.2 percent and down from 10.4 percent in February, according to Edmunds.com analysis. -- Michelle Krebs, Senior Analyst and Editor at Large