Record high fuel prices have Americans grumbling at the gas pump, but they did little to keep sales of new cars, and even SUVs, from climbing in May, analysts said.
Massive incentives are expected to boost industry sales about 4 percent for the month to a seasonally adjusted annual rate of 17.0 million or more, the strongest rate since December, analysts said.
"We're not seeing a shift toward more fuel-efficient vehicles," said Walter McManus, executive director of forecasting and analysis with J.D. Power and Associates. "We think that (sales for) the three major truck segments -- pickups, SUVs and vans -- will all be up."
Automakers are scheduled to report May sales on Wednesday, June 2, following the Memorial Day holiday weekend, one of the strongest vehicle sales periods of the year.
One official at a car company, who declined to be named, said that based on forecasts shared between automakers, sales could climb to an annual rate of 17.4 million, up sharply from the disappointing rate of 16.4 million in April and the 16.3 million rate a year ago.
May started where April ended, with slow sales across much of the country, fueling fears that gasoline prices above $2 a gallon in most of the country would hurt vehicle sales.
But carmakers, faced with rising inventories of unsold vehicles, reacted by raising further already high consumer incentives, particularly on big sport utility vehicles.
In mid-May, General Motors Corp., the world's largest automaker, raised the cash rebates offered on many of its popular mid-size and full-size SUVs by $500 to $4,000, and other automakers also increased incentives.
"(Automakers) are just giving away cars now," said Joseph Barker, senior forecast manager with CSM Worldwide. "It does eat away at profits, there's no question about it."
Detroit sales up
GM and the Chrysler arm of DaimlerChrysler AG are expected to post a 3 percent to 5 percent increase in May, Morgan Stanley analyst Stephen Girsky said in a research report. Ford Motor Co. sales are expected to be flat to up 2 percent, while foreign carmakers will post a collective 1 percent to 3 percent gain, Girsky said.
"It does look to be a solid month," said Paul Taylor, chief economist with the National Automobile Dealers Association. "I think we're going to see strength across the board."
Some car dealers said that high gas prices had some consumers trading in their large SUVs for cars, and raised interest in more fuel-efficient hybrid cars, which run on batteries and gas engines. But others said that the shift was marginal, and incentives have helped boost SUV sales.
"It looks like General Motors (sales) is going to be up, and the SUV sales are going to be strong," Sid DeBoer, chairman and chief executive officer of car dealership group Lithia Motors Inc., told Reuters. "We're not alarmed by any change in the sales results (because of gas prices)."
The strengthening U.S. economy and falling jobless rate appear to be helping consumer confidence and car sales, said Lithia Chief Financial Officer Jeffrey DeBoer. "That's why the gas prices may not be affecting things as much as people might guess," he said.
