Automakers Hiked Incentives in Attempt to End Year on a High Note
January 03, 2008

The average automotive manufacturer incentive in the U.S. is estimated to have been $2,472 per vehicle sold in December 2007, up $197, or 8.7 percent, from November 2007, and up $157, or 6.8 percent, from December 2006, according to calculations by Edmunds.com.

Domestic automakers as well as European, Japanese and Korean ones raised incentives in December in an attempt to end the year on a high note.

However, sales reports, being released on Thursday, indicate that note was not so high. Industry sales for the year are expected to come in at 16.1 million, the lowest level since 1998.

Combined incentives spending for domestic manufacturers averaged $3,332 per vehicle sold in December 2007, up from $3,140 in November 2007. From November to December, European automakers increased incentives spending by $218 to $2,630 per vehicle sold; Japanese automakers increased incentives spending by $148 to $1,266 per vehicle sold; and Korean automakers increased incentives spending by $46 to $2,195 per vehicle sold.

In December, the industry's aggregate incentive spending is estimated to have totaled approximately $3.38 billion, up 26.7 percent from November. Chrysler, Ford and General Motors spent an aggregate of $2.33 billion, or 68.9 percent of the total; Japanese manufacturers spent $629 million, or 18.6 percent; European manufacturers spent $286 million, or 8.4 percent; and Korean manufacturers spent $139 million, or 4.1 percent.

"In October and November sales were painfully slow, so in December some automakers took more dramatic steps to attract shoppers and sell off inventory," stated Jesse Toprak, executive director of industry analysis for Edmunds.com. "We anticipate that in 2008 automakers will have to continue their generosity, especially in segments that are particularly competitive or especially slow-moving."

Among vehicle segments, large trucks had the highest average incentives, $3,870 per vehicle sold, followed by large cars at $3,731. Compact cars had the lowest average incentives per vehicle sold, $1,005, followed by sports cars at $1,550. Analysis of incentives expenditures as a percentage of average sticker price for each segment shows large cars averaged the highest, 13.6 percent, followed by large trucks at 12.1 percent of sticker price. Luxury sports cars averaged the lowest, 3.3 percent, followed by sports cars at 4.8 percent of sticker price.

Automakers are targeting their incentives very carefully these days. They realize that there is no reason to throw money at those flocking to the fuel-saving compacts and crowd-pleasing sports cars.

Comparing all brands, in December Mini spent the least — virtually nothing — followed by Scion at $175 per vehicle sold. At the other end of the spectrum, Saab spent the most, $6,721, followed by Cadillac at $6,063 per vehicle sold. Relative to their vehicle prices, Saab and Pontiac spent the most, 19.8 percent and 18.7 percent of sticker price, respectively, while Mini spent virtually nothing and Porsche spent just 0.6 percent.

Edmunds.com's monthly True Cost of IncentivesSM (TCISM) 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.

Source: Edmunds.com

Posted by Michelle Krebs at 10:45 AM under Analysis , Chrysler , Ford , GM , Toyota | Comments (0) | digg this | Seed Newsvine