Incentives Rise as SUV Sales Growth Slows in U.S.

SUV/crossovers remain the hottest-selling sector of the U.S. auto market. But inventories are piling up, and profit-sapping sales incentives are on the rise.

Last month the cost of such incentives jumped 24% compared with a 13% increase for the market overall, according Bloomberg News, which cites dealer data from J.D. Power’s Power Information Network. PIN says the average SUV sale in January included $3,663 in discounts, up $704 from January 2016.

At the same time, the average transaction price for such vehicles shrank by $733 to $33,100. “There’s more price pressure ahead,” warns Jeff Schuster, who heads automotive analysis for LMC Automotive.

Schuster says carmakers, who were caught chronically short when the SUV/crossover boom began five years ago, over-produced in October-December. Now U.S. dealer inventories of unsold SUVs surpass 1.6 million units, one-third higher than they were a year ago.

Last year the SUV/crossover segment, led by the Honda CR-V (2017 model pictured), outsold conventional cars for the first time ever. But sales growth, which surged 16% in 2015, slowed to 8% in 2016.

Still, that doesn’t mean that growth will stop. LMC predicts SUVs will capture 43% of the U.S. market in 2024 compared with 30.7% in 2012 and nearly 40% last year. Schuster says it’s still possible that SUVs will reach 50% of the U.S. passenger car market in the next few years.