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Analysis: 2018 Holds Promise for Dealers—if Incentive Spending is Limited

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Feb. 6, 2018—The Motley Fool financial-services website recently analyzed January sales data—after 2017 began with a modest, 1.2 percent sales gain—and concluded that 2018 could be another solid year for the auto industry, assuming incentive spending is eventually reined in.

Recent tax reform poses questions for the automotive industry, of course, as large pickups sell well and drive larger transaction prices and margins. The good news for investors in automakers such as Ford and General Motors is that tax reform could give businesses incentive to purchase trucks for fleets, The Motley Fool suggested.

While U.S. sales have largely plateaued in the new-vehicle market, the sales mix continues to favor automakers with a strong lineup of SUVs, trucks and crossovers, which all drive better top and bottom lines than passenger cars do. General Motors’ crossover sales increased 20 percent in January, for example, though its cars declined 30 percent.

Finally, dealerships’ incentive spending was analyzed by the financial services website. The average incentive on a new vehicle jumped nearly 10 percent to $3,812 in January, compared with the prior year. And, according to estimates made by consulting business ALG, automakers Ford, GM, Fiat Chrysler Automobiles, and Nissan were among the largest spenders on incentives in January. This will likely be a key factor for investors to watch, and the automotive market will likely only remain healthy if incentives don’t balloon throughout 2018.

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