American carmakers and dealerships are trying to outbid one another when it comes to lower prices in an effort to boost slowing winter sales.
In the winter of the polar vortex and unusually rough weather, people haven't been eager to buy cars, so manufacturers and dealers have been offering deep discounts.
While competing sale prices could be a short-term fix, carmakers could be in trouble if it continues.
"The danger is that this could be the beginning of an escalating arms race for market share," Eric Lyman, vice president for industry consultant ALG, told Reuters.
Carmakers across the board are offering substantial discounts. Ford and General Motors have the biggest price cuts with sales on the 2014 Ford F-150 and Chevrolet Silverado full-size pickup trucks, respectively, Reuters reported.
Toyota, a brand that generally stays away from incentives, is discounting its mid-size family sedan to combat the winter slowdown.
Last month, Toyota Camry sales fell 27 percent, influencing the American sales arm to increase incentives 38 percent year-over-year, according to Reuters.
"Toyota may have to revise current (production) schedules and/or utilize still higher incentives" if sales don't improve, auto analyst Joseph Spak of RBC Capital Markets told Reuters.
Honda, another company that seldom relies on incentives to boost sales, has been using similar tactics, discounting in the midsize segment and offering low-interest loans on the 2014 Accord.
A Nebraska Honda dealership is offering a lease deal on a 2014 Accord LX sedan for $269 a month with zero down or $199 a month with $2,500 down, Reuters reported.
If sales continue to struggle through the next two months, carmakers may have to keep offering these deep discounts and even try to add more.
But at least one analyst consulted by Reuters pointed to a brighter long-term future for carmakers thanks to ageing vehicles and new drivers.
Through the next five years, "U.S. sales can be sustained at a relatively high level" based on the average age of vehicles in the United States, which is 12 years, and the 1.5 million new drivers expected to need cars in the next five years, analyst Michael Ward of Sterne Agee told Reuters.
"In our view (that) will produce record financial results for the industry," Ward said.
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