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US auto sales on fast track

Detroit, Aug. 22 (Reuters): Auto makers and industry experts see August shaping up as another hot month for US vehicle sales, thanks to interest-free loans and other hefty rebates.

But a number of observers are beginning to question how long new vehicle sales, a linchpin that accounts for roughly 10 per cent of the U.S. economy, can thrive amid America’s tepid economic recovery. A sudden drop in the industry’s strength could signal that the wheels of the economy have stopped moving.

Analysts expect auto sales in August to run roughly 7 per cent to 9 per cent higher than last year, at a seasonally adjusted annual rate of about 17.6 million vehicles—off from July’s blockbuster pace of 18.1 million, but well ahead of the 16.4 million rate in August 2001.

The decline from July’s pace would come as Detroit’s Big Three auto-makers start to run low on the 2002 model year vehicles carrying the zero-per cent loans and large rebates. Earlier this month, all three began offering far less generous rebates on the 2003 models just beginning to hit dealerships.

Once again, General Motors Corp. is expected to lead the industry, with a sales gain of 10 per cent to 15 per cent over August of last year. GM has been the most aggressive in offering zero-per cent loans and other deals, counting on its lower manufacturing costs to maintain profits.

Ford Motor Co. and DaimlerChrysler AG’s Chrysler arm are expected to report smaller gains. Ford broadened its interest-free loans earlier this month on its Explorer sport utility vehicle and Mustang sports car.

Auto makers have been immune so far to the malaise most retailers have felt over the past few months and some commentators have suggested consumers are spending on cars at the expense of everything else.

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