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New cars don't slow rebates
Tough market forces discounts, rebates, even on new models
By Christine Tierney
The Detroit News
The incentive habit is proving hard to kick for Detroit automakers even though they are flooding showrooms with a wave of new cars and trucks.
Even as automakers drove rebates to stratospheric levels to boost car sales, Big Three executives have been banking on new models to wean consumers off discounts that averaged $2,906 per vehicle, up 31 percent from a year ago.
But discounts are showing up not only on slow-sellers and aging models, but also on new vehicles still in the ramp-up phase.
Chryslers Pacifica wagon, General Motors Corp.s Buick Rainier sport utility vehicle and Fords Mercury Monterey minivan have been on the market less than a year, but already carry more than $4,500 in incentives, according to New Jersey-based Autodata Corp.
Its a troubling trend for Detroit?s automakers, which are counting on new, higher-quality cars and an economic upswing to restore profits after three lean years.
Automakers normally generate the highest return on a vehicle in its early years, when it looks fresh. But some brands are now flogging deals on new vehicles even before they hit the showroom.
"The days of being able to sell cars without incentives in this market are long gone," thats old and new models, said Morgan Stanley auto analyst Steve Girsky.
When Ford Motor Co. launched the new F-Series pickup last fall, one of its most popular and lucrative vehicles, the Dearborn automaker offered Ford truck owners loyalty bonuses to fend off Japanese rivals encroaching in the pickup market.
The Pacifica, with a starting price of $28,845, is caught between high-quality but less expensive minivans and entry-level premium marques costing a few thousand more, analysts say. Meanwhile, the Mercury Monterey suffers from consumer perceptions that Mercury models are just fancier and pricier versions of Fords.
"Unless the vehicle is truly unique, and demand is greater than supply, very few vehicles are exempt from needing some support to be competitive," says Ron Pinelli, president of Autodata.
Among the lucky few models that command their full sticker price are GM?s new Pontiac GTO sport coupe and Toyota's Prius gas-electric hybrid, popular with ecologically minded motorists. The powerful Dodge Viper, a cult favorite, also carries no incentives.
"Incentives motivate you to look at a car you normally wouldn't be able to afford," Davis said.
Over the past 20 years, customers have grown accustomed to discounts and rebates, which surged after September 11, 2001 as automakers acted to avert a sales slump.
More than a third of likely car buyers said they would probably not purchase a vehicle without incentives, according to a survey conducted last month by auto data consultants Kelley Blue Book and market research firm Harris Interactive.
Although automakers have been increasing base sticker prices, as well as incentives, they are not able to halt an erosion in pricing in the most competitive segments.
In the midsize sedan segment, including Toyota's Camry and Ford's Taurus, the major contenders have suffered declines in the transaction price over the past three years, with the exception of the Honda Accord, according to Power Information Network, the market research arm of J.D. Power and Associates.
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Tough market forces discounts, rebates, even on new models
By Christine Tierney
The Detroit News
The incentive habit is proving hard to kick for Detroit automakers even though they are flooding showrooms with a wave of new cars and trucks.
Even as automakers drove rebates to stratospheric levels to boost car sales, Big Three executives have been banking on new models to wean consumers off discounts that averaged $2,906 per vehicle, up 31 percent from a year ago.
But discounts are showing up not only on slow-sellers and aging models, but also on new vehicles still in the ramp-up phase.
Chryslers Pacifica wagon, General Motors Corp.s Buick Rainier sport utility vehicle and Fords Mercury Monterey minivan have been on the market less than a year, but already carry more than $4,500 in incentives, according to New Jersey-based Autodata Corp.
Its a troubling trend for Detroit?s automakers, which are counting on new, higher-quality cars and an economic upswing to restore profits after three lean years.
Automakers normally generate the highest return on a vehicle in its early years, when it looks fresh. But some brands are now flogging deals on new vehicles even before they hit the showroom.
"The days of being able to sell cars without incentives in this market are long gone," thats old and new models, said Morgan Stanley auto analyst Steve Girsky.
When Ford Motor Co. launched the new F-Series pickup last fall, one of its most popular and lucrative vehicles, the Dearborn automaker offered Ford truck owners loyalty bonuses to fend off Japanese rivals encroaching in the pickup market.
The Pacifica, with a starting price of $28,845, is caught between high-quality but less expensive minivans and entry-level premium marques costing a few thousand more, analysts say. Meanwhile, the Mercury Monterey suffers from consumer perceptions that Mercury models are just fancier and pricier versions of Fords.
"Unless the vehicle is truly unique, and demand is greater than supply, very few vehicles are exempt from needing some support to be competitive," says Ron Pinelli, president of Autodata.
Among the lucky few models that command their full sticker price are GM?s new Pontiac GTO sport coupe and Toyota's Prius gas-electric hybrid, popular with ecologically minded motorists. The powerful Dodge Viper, a cult favorite, also carries no incentives.
"Incentives motivate you to look at a car you normally wouldn't be able to afford," Davis said.
Over the past 20 years, customers have grown accustomed to discounts and rebates, which surged after September 11, 2001 as automakers acted to avert a sales slump.
More than a third of likely car buyers said they would probably not purchase a vehicle without incentives, according to a survey conducted last month by auto data consultants Kelley Blue Book and market research firm Harris Interactive.
Although automakers have been increasing base sticker prices, as well as incentives, they are not able to halt an erosion in pricing in the most competitive segments.
In the midsize sedan segment, including Toyota's Camry and Ford's Taurus, the major contenders have suffered declines in the transaction price over the past three years, with the exception of the Honda Accord, according to Power Information Network, the market research arm of J.D. Power and Associates.
Full Uncut Article Here
Also See
