U.S. auto sales plunge 37%; automakers blame tight credit

DETROIT -- Auto sales in the U.S. took an unsettling drop of 37.1% in January, compared with January 2008, falling to a 28-year low.

The slide also toppled the U.S. from its position as the world's largest car market: For the first time, more cars were sold in China in one month than in the U.S.

Limited credit availability and weakened consumer confidence continue to pummel sales, which fell to 657,000 vehicles, down from 1.04 million a year ago, according to data-tracking firm Autodata. Lower fleet sales also contributed to the gloomy results.

Sales could have been 20% to 25% higher for the industry with more credit availability, some executives say. The lack of credit "is choking us to death," says Mike DiGiovanni, executive director of global market analysis for General Motors. "Our industry is driven by credit more than any other industry. It's an industrywide problem, not just a GM problem."

Don Esmond, senior vice president of Toyota Motor Sales, estimates there are about 1 million potential buyers waiting for the economy to improve. Buyers are "postponing everything," he says. "The next six months, we'll be bouncing along the bottom."

The automakers are desperately searching for signs of where that bottom will be. "What we're looking for is stabilization. You have to stop falling before you can start rising," says Emily Kolinski Morris, Ford's economist. "Consumers are responding to favorable prices and discounts."

The automakers have rolled out hefty incentives to boost sales. Edmunds.com estimated the average automaker incentive at $2,714 per vehicle sold in January, up 12.5% from January 2008. GM on Tuesday announced a package of sweetened rebates and 0% financing.

January is typically a slow sales month, and many automakers and analysts still forecast some market rebound in the second half of the year.