Toyota Scions are displayed at the New York International Auto Show during the press preview Thursday.Spencer Platt
It's a full-blown incentive war and it's pulling North Americans back into dealers' showrooms.
Low interest rates, lease deals and free maintenance - led by Toyota Motor Corp. - drove a healthy rebound in auto sales last month, but car makers insist a broad improvement in the North American economy is also helping to put the auto industry back in gear.
Americans hit dealer lots in numbers not seen since September, 2008 - with the exception of a spike last summer during the U.S. government's cash-for-clunkers incentive plan - when the financial crisis sent the auto industry tanking.
The Canadian market posted solid gains as well, jumping 14 per cent from the level of March, 2009, but fell short of the level reached in March of 2008 before the crisis hit.
Toyota kicked off a U.S. incentive battle in an effort to bounce back from a recall crisis that hammered its sales in February. That sparked a 41-per-cent jump in Toyota's U.S. sales, putting the company just 2,000 units shy of market leader General Motors Co.
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Toyota Canada Inc. boosted sales 24 per cent and ranked second in the country amid its most aggressive "Red Tag" incentive plan ever.
As the crisis abated, Detroit auto makers reduced supply and strove to reduce reliance on costly and brand-damaging rebates. Now they are worried about getting pulled again into that profit-squeezing vortex.
"There's one manufacturer that is certainly putting the gas pedal down on incentives in both Canada and the U.S. and it's evident in their results," Chrysler Canada Inc. president Reid Bigland said.
He did not point to Toyota directly. "The problem with that is, I don't know how you stop it. We've been there, but I'd like to think we're operating a lot more responsibly now under our new ownership."
Another senior industry executive noted that although industry sales are rebounding, incentives are again playing a role. "Hope it's not a sign of things to come," the executive said.
Ford Motor Co. of Canada Ltd. grabbed first place ahead of Toyota with a 29-per-cent gain in sales. While Chrysler fell just short of No. 2, its 22-per-cent increase allowed it to jump ahead of General Motors of Canada Ltd., which took fourth place.
GM Canada sales slid 22 per cent as it continues to grapple with the fallout from its decision to cut the number of company brands to four from eight. GM and Porsche were the only auto makers whose sales fell last month.
The GM slide pushed its market share down to just 14.7 per cent, a level it has not seen since the period between 1915 and 1919, said industry analyst Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc. in Richmond Hill, Ont.
Otherwise, Mr. DesRosiers noted, it was a solid month.
"The economy is definitely coming back in North America and in Canada for sure," added Mr. Bigland.
In the United States, the seasonally adjusted annual rate for the first quarter was 11.3 million vehicles, said George Pipas, chief sales analyst for Ford Motor Co. That's a more accurate measure than a monthly snapshot, Mr. Pipas said, and surpasses the 11 million rate of the fourth quarter of 2009.
"We think this is a positive, an indication that auto sales are on track for a modest recovery in 2010," he told a conference call.
But as a measure of how severe the crisis of 2009 was, Americans routinely purchased 16 million vehicles annually during the past two decades.
GM said it was maintaining a forecast that overall U.S. sales will hit between 11.5 million and 12 million this year.
GM's incentive costs fell last month to less than the industry average, said Susan Docherty, vice-president of U.S. marketing.
"We no longer have the dubious honour of leading this category," Ms. Docherty said, pointing to data from consulting firm J.D. Power and Associates, which showed GM incentives at about $2,800 (U.S.) a vehicle, down about $2,000 from a year earlier and $200 from February.