U.S. auto sales in April expected to drop despite big discounts

Average discount per vehicle is now about $3,700

DETROIT — U.S. auto sales in April likely fell nearly 8 percent from the same month in 2017 despite big discounts for consumers, industry consultants J.D. Power and LMC Automotive said on Thursday.

For much of the past two years, the discounts offered by automakers have remained at levels that industry analysts say are unsustainable and unhealthy in the long term.

April U.S. new vehicle sales will likely be about 1.31 million units, down from 1.42 million units a year earlier, the consultancies said.

The forecast was based on the first 17 selling days of April. Automakers, including Ford and Fiat Chrysler Automobiles, will release April U.S. sales results on May 1.

Earlier this month, No. 1 U.S. automaker General Motors said it will stop reporting monthly U.S. sales because the 30-day snapshot does not accurately reflect the market. GM will instead issue quarterly sales reports.

U.S. new vehicle sales fell 2 percent in 2017 to 17.23 million units after hitting a record high in 2016.

Sales are expected to drop further in 2018 as interest rates rise and more late-model used cars return to dealer lots to compete with new ones.

LMC expects full-year 2018 U.S. new vehicle sales to come in at around 17 million units.

"Uncertainty and unfavorable factors appear to be mounting for autos, including a volatile stock market, rising interest rates, rising oil prices and potential trade roadblocks," Jeff Schuster, LMC's head of global vehicle forecasts, said in a statement.

The seasonally adjusted annualized rate of sales for April will be 16.6 million vehicles, down more than 2 percent from 17 million units in April 2017, the consultancies said.

Retail sales to consumers, excluding lower-margin fleet sales to rental agencies, businesses and government, were set to decline about 9 percent in April.

The level of consumer discounts, which can erode profit margins and undercut resale values, "remains the larger concern," the consultancies said.

The average discount was $3,698, up $187 from April 2017. Discounts on trucks and SUVs were up $426, but down $226 on passenger cars.

Reporting by Nick Carey

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