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Last Updated: Thursday, 3 June, 2004, 04:38 GMT 05:38 UK
Discounts drive US car sales rise
SUVs in New York
Even oil worries couldn't put buyers off gas guzzling SUVs
US car sales picked up in May despite surging oil prices, as heavy discounts lured in more buyers.

General Motors (GM) reported a better than expected 6.5% jump in sales, boosted by an 11% surge in truck sales.

Chrysler, meanwhile, reported a 5% increase on strong demand for its new flagship sedan, the Chrysler 300.

But Japanese carmakers made the biggest gains, increasing market share by 2% despite offering smaller incentives than domestic rivals.

Nissan sales were up 24% on the previous year, with Toyota, now the US number two seller, up 8.4%.

Toyota' spent more on incentive packages - including loan rebates and discounts - than its Japanese rivals at an average of $2,982.

These were just stunning numbers... Higher gas prices may slow things in future, but it clearly hasn't hit spending yet
Joe LaVorgna, Deutsche Bank Securities
But that was significantly below even the least generous US carmaker, Ford, which averaged $4,297.

In total, Japanese firms saw sales rise 9.9% to 567,000, against an overall rise of 3.4% in US sales to 1.63 million units.

'Stunning numbers'

Adjusted for seasonal factors, the May sales produce an annualised rate of 17.8 million cars sold.

The figure makes May the best month since August last year, and markets a sharp improvement on the 16.4 million seen in April.

"It was a good month, a very strong month for the industry," said GM head of market and industry analysis Paul Ballew.

May's rise is even more significant amid the background of soaring fuel prices which was expected to put off many potential buyers - as well as concerns about rising interest rates.

"These were just stunning numbers," Deutsche Bank Securities US economist Joe LaVorgna said.

"Higher gas prices may slow things in future, but it clearly hasn't hit spending yet."

No slowdown in truck sales

After suffering slow sales in April, auto makers hit back by ratcheting up already high incentives - particularly in gas guzzling sports utility vehicles and big pick-ups - sacrificing profits in a bid to cut overstocked inventories.

GM chairman and chief executive Rick Wagoner added: "So far, people are really buying more trucks, more SUVs than they ever have."

Of the big names only Ford suffered a further slip in sales.

A lack of new models in its line-up has seen buyers desert the company, knocking its sales lower in all but one month so far this year, with May no exception at a 3.1% slip.

But the firm said that after adjusting for the loss of one selling day in the month and excluding foreign brands Volvo, Jaguar and Land Rover, sales actually increased by 1%.

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