Worrisome trends in auto industry, from J.D. Power analyst

Worrisome trends in auto industry, from J.D. Power analyst

In the wake of Marchês lackluster sales report, J.D. Power analyst Thomas King outlined several potentially worrisome trends in the industry, from high incentives to production mismatched to consumer demand. King spoke at the NADA/J.D. Power Automotive Forum in New York last week as the auto show there was poised to commence.

« Incentives hit an average of $3,900 per unit in the first quarter, up from $3,400 a year earlier and higher than at any point during the Great Recession. King doubted that automakers would cut production to meet demand and risk losing market share.

« As consumers keep moving to CUVs and SUVs, car inventory is piling higher. Demand for utility vehicles is likely to increase (see article on page 2), and production plans will continue to lag consumer demand. That should give manufacturers more reason to cut back on production, at least of cars.

« An oversupply of used cars has brought down used-vehicle prices. That trend could cause problems for dealers when consumers find their trade-ins are worth less than they thought.

« Loans are getting longer. Loans of 72 months or longer accounted for 33.9 percent of new-vehicle transactions in the first quarter, up from 32.3 percent a year earlier, according to J.D. Power. As dealers may remember from the bad old days of many upside down buyers, long loans may trade instant gratification (making the sale) for long-term pain (consumers who cannot afford a down payment when they are ready for a new vehicle and they are upside down on their trade).