Big incentives are driving July vehicle sales despite the high price for gasoline. Gasoline is still at 2.28 nationwide according to AAA's Fuel Gauge Report -- just a few cents off its July 14th peak of $2.32. J.D. Power and Associates Chief Economist Bob Schnorbus says incentives are keeping auto sales strong:
"Gasoline prices are not killing the market, just putting a bit of a drag on it," Schnorbus said. "The sales surge we saw in June and July was caused by incentives overpowering high gasoline prices."
Schnorbus noted that the increase in incentives in June and July created a sales jump similar to what the industry experienced in 2004 when automakers boosted incentives.
"The incentives are different and it's slightly earlier than last year, but it has created a similar boost in sales," Schnorbus said. "Once the 2005 models are gone, sales will return to a more temperate pace."
J.D. Power also says that the employee discount programs have even boosted sales of the gas guzzling full-size SUVs.
One vehicle segment that had been struggling in a flourishing market is full-size SUVs, but Schnorbus noted that it has received a large boost from the employee programs. Still, full-size SUV sales are down 12 percent on a year-to-date basis and the segment’s market share has slipped to 3.57 percent from 4.14 percent in 2004. In addition, premium luxury SUV sales are down 7.92 percent compared to a year ago, while the other SUV segments—entry, midsize and entry luxury—are all experiencing year-over-year sales growth.
"The SUV market is not going to disappear as a result of high gasoline prices," Schnorbus said. “In fact, it will grow over the five-year forecast horizon."
