Autos headed for a wreck? Depends on who you ask

Auto sales top?
Auto sales top?

At Fox Ford and Lincoln not far from Chicago's Loop, Mike Fullmer says sales are so brisk his biggest concern is getting enough new models to keep up with demand.

"I'm concerned about having enough cars." said Fullmer, the General Manager at Fox. "This has been a really good month."

Despite a strong summer at Fox and other dealerships around the country, there's a growing worry on Wall Street. The auto market's five year run of expanding production and profits is showing signs of nearing a top.

Read More

"We're pulling forward from the future and it's worrisome" said Adam Jonas, a veteran auto analyst with Morgan Stanley.

Jonas is saying what others in the industry have been whispering about for some time. The auto industry has added back so much vehicle production it could soon find itself in a position of pushing sales with heftier incentives and creative financing in order to keep sales going at a pace of 16.5-17.5 million vehicle sales annually.

"We're pushing and doing experimental things with terms of auto loans. They've hit 70 months versus a historical average of 60 months," said Jonas. "Leasing has blown out. It's 30 percent of sales versus the previous peak of 26 percent."

Sales towards 17 million

With dealers and financing firms pushing easier credit so buyers can get a new vehicle with a low monthly payment, this summer has seen big sales.

Read MoreSoft auto salesput a brake on June retail sales

In June the annual sales rate in the U.S. was 16.9 million vehicles according to the research firm Autodata. This month the pace may not be quite that high, but several research firms are forecasting a pace of 16.6-16.7 million.

"Most of the sales we're seeing right now are being driven by organic demand" said TrueCar President John Krafcik.

Krafcik is watching the incentives closely. In June they increased by $42 compared to June of last year to an average of $2,735 according to the auto shopping website TrueCar.

A Ford F150 pickup truck is displayed at Al Piemonte Ford on June 3, 2013 in Melrose Park, Illinois.
Getty Images

With 2015 models starting to hit showrooms, Krafcik and others are watching if incentives keep edging higher. If they do, that could be an early sign that dealers and automakers are working harder (and spend more) to keep sales moving.

"If incentive spending keeps increasing, it means dealers and automakers are starting to feel pressure," said Krafcik. "I still think there's enough demand to support sales at this pace, but you want to watch incentives."

Automakers adding plants, shifts

Jonas has no doubt Americans still have a strong appetite for new cars, trucks and SUVS. In fact, he believes the annual sales rate will climb to an all-time record high of 18 million by 2017.

Read MoreThe safest used cars for teen drivers

The issue may be whether the auto industry has been so aggressive adding new shifts at existing assembly lines and capacity at new plants that there will soon be too much supply of new vehicles.

We've added back 120-130 percent of the capacity we took out during the recession" said Jonas.

The current boom in auto production in Mexico is an example of the new surge in supply heading to U.S. showrooms.

Read MoreCar thieves are targeting luxury vehicles

For now, those showrooms are still humming with buyers looking for a new model.

"I know we have room to grow sales," said Fullmer.

Questions? Comments?