With a SAAR this hot, who needs big incentives?

U.S. auto industry that has spent decades addicted to generous consumer incentives may have discovered the key to weaning itself from the profit-sucking habit: record low inventories.

The seasonally adjusted, annualized rate of sales reached 18.5 million in April, its second consecutive month topping the 18 million mark and faster than booming March sales, according to Motor Intelligence.

The gains came despite a 25 percent year-over-year drop in incentives to $3,239 per vehicle — and a 14 percent year-to-date drop to $3,404 — while dealership inventories dipped further to just a 33-day supply, according to data compiled by Motor Intelligence and the Automotive News Research & Data Center.

Ford brand incentives, for example, fell 34 percent compared with last year to an average of $2,749, according to Motor Intelligence. Jeep declined 35 percent to $2,800, and Kia was down 36 percent to $2,570. Among luxury brands, Mercedes-Benz fell 44 percent to $3,799, and Audi dropped 35 percent to $4,839. The Toyota brand, whose average spend is among the lowest in the industry, saw an 8.4 percent increase to $2,170.

"April may have been the strongest true demand that the industry has ever seen," said Tyson Jominy, vice president for data and analytics at J.D. Power.

Jominy said the month's results "are in the pantheon with two of the most successful and studied incentives pushes in history": General Motors' "Keep America Rolling" campaign in the wake of 9/11 and "Employee Pricing for All" in July 2005.

But what makes this result so different is that incentives were not a big factor driving sales last month, Jominy said.

Indeed, year-over-year comparisons with the pandemic-ravaged April 2020 — when auto plants and many dealerships were shut down as the crisis bottomed out much of the nation's economy — showed huge gains.

Toyota, American Honda, Hyundai, Subaru, Kia, Volvo and Mazda more than doubled their sales totals from the previous April, with Volvo, Mazda and Toyota posting gains in excess of 180 percent. Ford had the lowest year-over-year jump among automakers that reported April sales, at 65 percent. Meanwhile, analysts said overall industry sales more than doubled — rising 110 percent — in April.

Just how widespread was April's sales boom? Even minivans — which, as a segment, have been on a 15-year sales decline — experienced an almost fourfold sales increase for the month, according to J.D. Power.

"It's kind of that point where there are no dogs ... on dealer lots right now. Everything's a good option," said Jominy.

While it might be easy to dismiss the comparisons with 2020, last month looked pretty great compared with April 2019 as well, with a 23 percent rise in the retail daily selling rate.

"Nobody had any complaints about 2019," Jominy said, adding that per-vehicle incentives were down almost $500 last month compared with those in April 2019.

On might expect auto sales to slow when inventory is lacking and incentives are falling. But none of those traditional impediments may matter when the broader economy is rebounding as fast as it is.

The U.S. Bureau of Economic Analysis estimated at the end of April that the nation's gross domestic product had grown at an annualized rate of 6.4 percent in the first quarter. Meanwhile, the Conference Board's monthly Consumer Confidence Index rose to its highest level since February 2020 — before the start of the pandemic in the U.S.

Also juicing sales are used-vehicle prices, which have risen to historic levels and enticed many otherwise passive consumers to jump into the new-vehicle market before inventory shrinks further.

"I think there's a growing fear of missing out right now, especially if perhaps you thought you were going to need to buy a new vehicle over the summer months," Jominy explained.

"Dealers have done an excellent job communicating with their customers ... and that's bringing people in to shop."

Cox Automotive sees inventory levels continuing to stay low for some time as strong retail demand and continuing supply issues pinch new-vehicle supplies further.

"Americans have been largely stuck at home, and if you've maintained your job, and you got some tax refund and stimulus checks, you probably have some extra money," said Michelle Krebs, executive analyst with Cox Automotive. "People are itchy to spend money, and there seems to be a sense of urgency about getting a vehicle because people see that inventory is low, and they know about the chip shortage.

"One of my colleagues said it best: It's this year's toilet paper," Krebs said.