Pickup Truck Incentives: What Worked, What Didn’t

Pickup Truck Incentives: What Worked, What Didn’t

Last month, vehicle manufacturers launched a host of new incentives on their full-size pickup trucks in   response to Toyota introducing its new Tundra to the market and immediately promoting it with dealer incentives.

March full-size truck sales overall declined from a year ago, prompting truckmakers to try to not only hold onto their loyal owners but steal potential buyers from their competitors. Edmunds’ AutoObserver.com’s analysis of March sales figures showed some incentives succeeded in conquesting buyers; others did not. Here’s a snapshot of what worked and what didn’t:

· Toyota’s incentives of dealer cash paired with low-interest loans on the Tundra didn’t move the needle much in either direction in terms of conquest sales.

· General Motor’s incentives on its recently redesigned Chevrolet Silverado and GMC Sierra combined a relatively small cash bonus with low-interest financing. The incentives helped attract non-GM buyers to its fold.

· Ford and Dodge offered a choice of hefty cash bonuses or low-interest financing. The incentives boosted sales from the previous month but failed to help in terms of conquest sales from other makes.

· Nissan had higher Titan sales from February and a slightly higher conquest sales. But they came at a cost as Nissan offered large cash rebates and low-interest financing.

Still, so far, Toyota is selling its Tundra largely to current Toyota owners. It has made no inroads against domestic truckmakers, despite upping its incentives last month.

“Toyota aimed its Tundra squarely at traditional American truck buyers, and, so far, domestic truck loyalists aren’t biting. Increased incentives only two months after launch have failed to attract additional domestic truck owners, although it’s still too early to tell if this trend is permanent,” says Alex Rosten, Edmunds.com's manager of pricing and market analysis.

In contrast, GM’s zero-percent financing and $1,000 cash rebates lured truck buyers from other brands to its fold. “The appeal of zero-percent financing boosted GM’s conquest rates,” said Rosten.

However, Rosten added, similar incentives on Ford and Dodge trucks didn’t stop the slide of buyers going elsewhere.

Toyota: Higher Incentives, Flat Conquest Rates

Action taken: In February, Toyota introduced the much-anticipated Tundra pickup truck, built in San Antonio, Texas, to the market. The Tundra’s slow start can be blamed on a number of factors, with strong domestic loyalty heading the list.

In addition, Toyota didn’t launch what is expected to be its most popular version, the CrewMax, including the 5.7-liter engine, until a month later. Toyota further botched the Tundra’s pricing announcement. Because Toyota left out details in its initial announcement, the press pounced on the fact that the Tundra appeared to be priced higher than its competitors. Since then, Toyota has been trying to convince the press that it isn’t priced higher, but, in fact, it has more standard equipment, making it competitive.

Most factors blamed for the Tundra’s slow start are marketing related. However, maybe the Tundra itself, while Toyota’s first credible competitor to GM and Ford trucks, isn’t head and shoulders above its competitors. Maybe there’s not enough reason for a domestic buyer to buy a Toyota. In contrast to the cars, simply having the Toyota badge on a solid truck isn’t enough in the segment.

Then, came another setback -- the federal government announced the Tundra earned four stars in front crash test when its competitors earned the top five stars.

As a result, in early March, Toyota confirmed some of its dealers were offering discounts, lower interest financing and lease deals on the Tundra. As the month was coming to a close, Toyota added a number of dealer incentives to some versions of the Tundra.

Tundra incentives running through April are: 3.9 percent to 5.9 percent financing on all models, depending on the loan term; special lease rates on all models; $1,000 trade-in assistance for early termination of leases on the previous-generation Tundra; $2,000 dealer cash incentive on Regular Cab models; $1,000 dealer cash incentive on Double Cab models. The incentives run through the end of April. Some dealers already were offering as much as a $1,500 discount on the basic Tundra work truck, which is selling particularly slowly.

No incentives are offered currently on the CrewMax.

Result: Toyota sold 13,199 Tundras in the month of March, up 7.8 percent from the 11,800 units of the previous-generation Tundra sold in March 2006 and up from 9,669 Tundras sold in February.

The current sale rate is well off the pace of the nearly 17,000-a-month sales needed to meet Toyota’s target of 200,000 Tundras a year.

The Tundra is selling well among loyal Toyota owners. However, Toyota’s conquest rate for the Tundra, based on all types of vehicles of competing makes traded for the Tundra, is about at the same level as the conquest rate for all Toyotas. A spike in February when the Tundra was launched proved brief.

In terms of specifically conquest competing truck owners, Toyota hasn’t moved the needle. Tundra’s conquest rate of buyers coming from other truck brands has held steady for several months. The rate spiked in February when the Tundra was launched but has now dropped back to pre-February levels. Toyota must steal buyers from other truck makes for the Tundra to be successful.

GM: Incentives Boosting Conquest Rates

Action taken: In response to Toyota putting incentives on the Tundra, GM launched incentives of its own on its full-size pickup trucks introduced during the past year. GM’s incentives include $1,000 in cash bonus and zero-interest financing up to 36 months on all of its trucks, including the full-size Chevrolet Silverado and GMC Sierra .

Result: GM sold 38,784 Chevrolet Silverado 1500 models, down slightly from 41,750 sold in March 2006. GM also sold 10,766 GMC Sierra 1500 models, down from 12,989 in March 2006.

GM’s incentives, launched midway through March, successfully lured owners of other vehicle makes to Chevrolet, particularly, and GMC. Conquest rates -– that is buyers trading a vehicle from another brand –- for a Silverado 1500 rose 7.8 percentage points; the conquest rate of the GMC Sierra climbed 4.3 points. The conquest rate for buyers who specifically traded a truck of a non-GM make for a Silverado rose 3.5 percentage points and, even better, 7 percentage points for the Sierra.

GM’s rate for a GM truck traded in for a Silverado or Sierra declined, suggesting the automaker is luring its own car owners to its trucks, keeping them in the fold.

“GM’s zero-percent financing has them pointed in the right direction,” says Rosten. “GM has increased conquests, including a rise in truck conquests. Tundra, on the other hand, has fallen back to the pre-February norm, meaning that, so far, the Tundra is not attracting as many domestic truck buyers as Toyota had hoped.”

Ford, Dodge: Bigger Incentives, Little Action

Action taken: Ford and Dodge had hefty incentives on the F-150 and Ram, respectively. The incentives offered cash bonuses bigger than those offered by Toyota and GM or low-interest financing. Toyota and GM offered small cash bonuses but combined the cash with low-interest financing.

The Ford and Dodge incentives produced sales increases from February but no improvement in conquest sales.

Ford offered a $3,000 cash bonus or zero-percent to 2.9-percent financing on its F-150. Dodge is offering the biggest incentives in the category on its Ram. It is giving a $3,000 to $5,000 cash bonus or zero-percent to 5.9-percent financing.

Result: Ford sold 42,8076 F-150 pickups in March, up from 15,632 in February but down from 55,088 in March 2006. Dodge sold 21,068 Rams in March, up from 15,632 in February but down from 24,457 in March 2006.

Conquest rates, based on trade-ins from other vehicle makes on Ford and Dodge trucks, dipped 2.8 percentage points for the Ford F-150 dropped 2.8 percentage points; Dodge’s dropped 4.2 points. Both edged downward a percentage point for other truck makes traded for theirs.

Nissan: Spends, Gains

Action taken: Nissan also offered big incentives on its Titan . Cash bonuses ranged from $3,000 to $3,500 or 0.9 percent financing.

Result: Nissan’s incentives boosted Titan sales to 7,563 units in March, up from 6,058 in February and 8,328 in 2006. Nissan’s conquest rate, based on trade-ins of vehicles of other makes, edged 3.6 percentage points. Nissan’s conquest rate, based on trade-ins of trucks of other makes, eked 1.4 percentage points higher.

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.