Skyrocketing incentives push May sales up 10%

Top line: Incentives are driving new vehicle demand across the U.S., pushing the annual sales rate to a 10-month high in May.

How many cars were sold in May?

• The seven automakers who posted monthly sales reported a combined total of 796,307 units, up 10.3% year-over-year.

• Toyota saw the biggest increase in sales, jumping 15.7% ahead of last year’s total. Hyundai came in second place with an 11.6% increase, followed by Ford at 11.4%.

• Volvo was the only brand to see a sales decline in May, missing its prior-year numbers by 5.3%

How did incentives contribute to these numbers? Here’s a quick breakdown.

• May 2024 average transaction price (ATP): $47,433

• May 2024 average incentive spend: $3,274

• May 2024 average incentive as percentage of ATP: 6.9%

Incentive spend is up 69% from the same time last year, according to Motor Intelligence, underlining how rapidly incentives have returned to the market. Given that sales have grown faster than prices have declined, it’s clear that this is having a positive impact on demand. That being said, discount levels are still well behind pre-pandemic norms. 

For comparison, here’s what the industry was seeing in 2019.

• December 2019 ATP: $38,948

• Full-year 2019 average incentive spend: $4,331

• Full-year 2019 average incentive as percentage of ATP: 11.12%

As you can see, consumers are receiving less in discounts today, both on a percentage-basis and dollar amount. 

However, it’s also important to note that 11.12% was hardly the norm, as it remains the all-time high for incentive spend. In the years leading up to the pandemic, the industry was fixated on keeping sales above the 17 million mark, driving manufacturers to push discounts higher and higher as the years went by. 

Today, that focus has long-since shifted, with companies putting greater emphasis on profit rather than volume.

Bottom line: Now that trends are normalizing, it seems incentives are coming back with a vengeance, to the benefit of consumers and dealers. Although it remains to be seen whether the industry will return to the days of record-high discounts, it’s certainly not out of the question, especially if automakers continue incentivizing at their current rate.

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