January Incentives More Generous Than Year Ago, Edmunds.com Estimates

January Incentives More Generous Than Year Ago, Edmunds.com Estimates

SANTA MONICA, Calif. – The average auto manufacturer incentive in the U.S. was $2,401 per vehicle sold in January, up $167, or 7.5 percent from January 2007, and down $56,  2.3 percent, from December 2007, Edmunds.com estimated Friday.

“In January, automakers decided to be more generous in their incentives spending in hopes of counteracting the slowdown in demand,” said Jesse Toprak, executive director of Industry Analysis for Edmunds.com.

“We do not foresee a dramatic turnaround in market conditions for at least the next several months, and yet the race for increased market share is in full force,” added Toprak. “This will provide a test of the automakers’ discipline about incentives, especially that the of the domestics who have been employing a ‘value pricing’ strategy quite successfully recently."

According to Edmunds.com’s estimates, combined incentives spending for domestic manufacturers averaged $3,384 per vehicle sold in January 2008, up from $3,254 in December 2007. From December to January, European automakers decreased incentives spending by $220 to $2,470 per vehicle sold; Japanese automakers decreased incentives spending by $6 to $1,266 per vehicle sold; and Korean automakers decreased incentives spending by $1,329 to $1,370 per vehicle sold.

In January the industry's aggregate incentive spending is estimated to have been approximately $2.53 billion, down 25.7 percent from December. Chrysler, Ford and General Motors spent an aggregate of $1.76 billion, or 69.6 percent of the total; Japanese manufacturers spent $514 million, or 20.3 percent; European manufacturers spent $185 million, or 7.3 percent; and Korean manufacturers spent $71 million, or 2.8 percent.

Edmunds’ research shows the Total Cost of Incentives (TCI) record was set in September 2004, when automakers spent an average of $3,146 per vehicle sold. Edmunds.com doesn’t expect that record to be broken this year because the large volumes of fuel-efficient cars being sold with minimal incentives will help to keep the average down.

Among vehicle segments, large trucks had the highest average incentives at $4,068 per vehicle sold, followed by large cars at $3,946. Compact cars had the lowest average incentives per vehicle sold, $1,070, followed by sports cars at $1,273. Analysis of incentives expenditures as a percentage of average sticker price for each segment shows large cars averaged the highest, 14.3 percent, followed by large trucks at 12.7 percent of sticker price. Luxury sports cars averaged the lowest, 2.9 percent, followed by sports cars at 4.2 percent of sticker price.

Comparing all brands, in January Mini spent the least — virtually nothing — followed by Scion at $160 per vehicle sold. At the other end of the spectrum, Saab spent the most, $6,212, followed by Cadillac at $6,158 per vehicle sold. Relative to their vehicle prices, Saab and Pontiac spent the most, 17.7 percent and 17.1 percent of sticker price, respectively; Mini spent virtually nothing and Scion spent just 0.9 percent.

Edmunds.com's monthly 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. 

Source: Edmunds.com

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