Edmunds: Incentives Edging Higher
June 01, 2007

Edmunds.com estimated today that the average automotive manufacturer incentive in the U.S. was $2,497 per vehicle sold in May 2007, up $44, or 1.8 percent, from April 2007, and up $123, or 5.18 percent, from May 2006. Honda, in fact, hit a record for incentives.

"The summer incentives hike has started," said Jesse Toprak, executive director of Industry Analysis for Edmunds.com. In previous months, we have seen year-over-year declines in incentives spending, but this month the trend reversed."

As the summer wears on, incentives will grow even bigger, Toprak predicts.

“Automakers typically enjoy the highest sales volumes during the summer months in part because of the generous offers intended to match customers to remaining inventory -– and the incentives only get bigger as the end of the current model year approaches,” he said.

In May, the industry's aggregate incentive spending is estimated to have totaled approximately $3.7 billion, up from $3.3 billion in April. Chrysler, Ford and General Motors spent an aggregate of $2.5 billion, or 67.3 percent of the total. Japanese manufacturers spent $736 million, or 19.9 percent. European manufacturers spent $367 million, or 10 percent. Korean manufacturers spent $107 million, or 2.9 percent.

Edmunds.com's analysis shows combined incentives spending for domestic manufacturers averaged $3,258 per vehicle sold in May 2007, down from $3,269 in April 2007. From April to May, European automakers increased incentives spending by $483 to $3,510 per vehicle sold; Japanese automakers increased incentives spending by $156 to $1,374 per vehicle sold; and Korean automakers decreased incentives spending by $233 to $1,524 per vehicle sold.

Edmunds' AutoObserver.com has learned that this month, Honda broke its company record for incentives spending. Honda is feeling a lot of competitive pressure. Some of its vehicles are a bit long in the tooth, and a handful compete in segments where generous incentives are essentially demanded. In those cases, the company has little choice. However, Honda’s newer and more fuel-efficient models sell with a fraction of the industry’s average incentive investment on the hood.

Among vehicle segments, minivans had the highest average incentives, $3,933 per vehicle sold, followed by luxury cars at $3,832. Sport cars had the lowest average incentives per vehicle sold, $937, followed by compact cars at $1,136. Analysis of incentives expenditures as a percentage of average sticker price for each segment shows minivans averaged the highest, 14.1 percent, followed by large cars at 13 percent of sticker price. Sports cars averaged the lowest, 3.2 percent, followed by luxury sports cars at 4.3 percent of sticker price.

Comparing all brands, in May Mini spent the least, virtually nothing, followed by Scion at $77 per vehicle sold. At the other end of the spectrum, Cadillac spent the most, $7,870, followed by Saab at $5,877 per vehicle sold. Relative to their vehicle prices, Saab and Cadillac spent the most, 17.8 percent and 15.6 percent of sticker price, respectively, while Mini spent essentially nothing and Scion spent just 0.5 percent.

Edmunds.com's monthly True Cost of Incentives (TCI) report takes into account all automakers' various U.S. incentives programs, including subvented interest rates and lease programs, as well as cash rebates to consumers and dealers. To ensure the greatest possible accuracy, Edmunds.com bases its calculations on sales volume, including the mix of vehicle makes and models for each month, as well as on the proportion of vehicles for which each type of incentive was used.

Posted by Michelle Krebs at 9:35 AM under Analysis , Companies , Ford , GM , Toyota | Comments (0) | digg this | Seed Newsvine