Incentives shift seen as auto demand rebounds

Incentives shift seen as auto demand rebounds

As vehicle production ramps up after a two-month shutdown, automakers will reassess incentive programs that largely expire June 1. Analysts expect automakers, heading into the summer selling season, to shift their focus to cash rebates and discounts targeted to specific models and regions with sufficient inventory while backing off the wide-ranging financing deals that helped sell pickups and SUVs in April and May.

Bomnin’s stock of the Chevy Equinox, Trax and Blazer crossovers should last through mid-June, but other utilities and pickups are scarce. “Core inventory is the problem,” Bomnin said. “If we keep the pace, we may run out of inventory by the end of this month.”

Even without incentives, analysts say, there is plenty of natural demand in the retail market again.

“The way that the COVID economic impact has hit the population has been disproportionate,” said Eric Lyman, chief industry analyst at vehicle listings site TrueCar. “It hasn’t impacted the group of buyers that are commonly found in new-vehicle sales and late-model [used]-vehicle sales.”

TrueCar’s search traffic and purchase intent returned to pre-virus levels in the last two weeks of April and continued to increase going into Memorial Day weekend.

“The automakers are starting to see … because we don’t have the production backfilling inventory at the dealers’ lots, we may have a situation where our incentives were too generous,” Lyman said. For example, Kia doesn’t need to incentivize the quick-turning Telluride as much as the widely available Sorento, he said.

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