Auto Bargains Drop As 2004 Models Debut

DETROIT John Porretto writing for the AP reported that the debut of 2004 models helped automakers reduce incentives nearly 7 percent last month, but analysts say consumers soon can expect another escalation in bargains as dealers make year-end sales pushes.

The average industry incentive fell to $2,715 a vehicle in October, $202 lower than September, aided by the seasonal shift to new models, according to Autodata Corp.

"October sales came in weaker than expected after two strong months, and inventories are above normal," Merrill Lynch analyst John Casesa said in a research report Friday. "We expect to see acceleration of incentives on 2004 models soon."

As a group, General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler Group lowered incentives by an average of 4.9 percent to $3,625 a vehicle. At the same time, their Asian competitors' deals averaged $1,212, down 13.5 percent from September. Average European incentives fell 20.5 percent to $1,890 a vehicle.

Detroit's Big Three automakers saw their sales decline 2.6 percent last month compared with year-ago tallies. For the year, they're down 4.1 percent.

Led by Toyota Motor Corp. and Nissan Motor Co., Asian automakers reported a 4.3 percent rise in U.S. sales last month and are up 3 percent so far this year. European companies were up 7.6 percent last month and have grown U.S. sales 2 percent so far this year.

By itself, Chrysler actually boosted outlays 9.9 percent, or $339 a vehicle, last month as Detroit's No. 3 automaker tries to spur business and rebound from heavy losses earlier this year.

"We think the incentives increase by the Chrysler Group, which introduced its 2004 models earlier than its domestic rivals, sets the tone for Big Three incentives as we move into November," Chris Ceraso, an analyst at Credit Suisse First Boston, said in a research report.

At Ford, average incentives fell 15 percent, or $538 a vehicle, last month. But Ceraso said he expects the world's No. 2 automaker to reverse course this month as it tries to increase sales of its top-selling and redesigned F-150 pickup.

When major automakers reported U.S. sales earlier this week, they were generally bullish on prospects for the rest of the year because of improving economic conditions.

The seasonally adjusted annual sales rate for October was 15.6 million units, a fraction ahead of last October but not even close to August's pace of 19 million units. The sales rate, known as SAAR, indicates what sales for the full year would be if they remained at the same pace for all 12 months.