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Incentives May Be Losing Allure

March 7, 2003

According to a Reuters report, the rebates, interest-free loans and other incentives that US car makers have used to keep sales healthy for much of the past year may be losing their allure, just as the industry braces for a slowdown.

Citing analysts' reports, Reuters said incentives in February averaged $2,225 per new vehicle, a 10 percent increase over January and a 33 percent increase over the same month a year ago. But the seasonally adjusted rate of sales fell to an annualized rate of 15.4 million, down from 16.2 million a month earlier and 16.6 million in February 2001.

The data are the first evidence of a trend that some industry executives have been warning about for several weeks, Reuters said.

"Based on February sales results, we are concerned that consumers' responsiveness to incentives is beginning to dull," Merrill Lynch analyst John Casesa said in a research note reported by Reuters.

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