October Sales Plummet; Incentives Soar
By Michelle Krebs November 3, 2008SANTA MONICA, Calif. -- While October sales are expected to plummet double-digits, auto manufacturer incentive spending is up double-digits from a year ago, Edmunds.com's analysis shows.
"Automakers have to do what they can to stimulate sales while still being fiscally responsible during these shaky economic times," stated Jesse Toprak, Edmunds' executive director. "The industry is still far below the record average incentive of $3,146, which was reached in September 2004."
Ford became the first major automaker to report October sales on Monday and confirmed predictions that vehicle sales have fallen to levels not seen in decades. "The month was as it was advertised," Ford's top sales analyst George Pipas told reporters on Friday as a lead up to sales day. Ford reported a 29.2 percent drop in vehicle sales in October.
Edmunds.com forecasts October new vehicle sales, including fleet and retail, will again fall below the 1-million mark to 872,000 vehicles sold -- about 30 percent below October 2007. October 2008 will mark the U.S. auto industry's lowest sales level since January 1992.
The average automotive manufacturer incentive in the U.S. totaled $2,648 per vehicle in October. That was up $471, or 21.6 percent, from October 2007 but down $253, or 8.7 percent, from last month.
Combined incentives spending for domestic manufacturers averaged $3,718 per vehicle sold in October, down from $4,041 in September. From September to October, European automakers increased incentives spending by $93 to $2,866 per vehicle sold; Japanese automakers by $107 to $1,495 per vehicle sold; and Korean automakers by $101 to $2,417 per vehicle sold.
Toyota is on track to achieve record market share, achieved through record incentive levels which offered zero percent financing on 11 of its models, including 2009 models. As a result, Toyota's incentives reached record highs for the Japanese automaker. Edmunds.com estimates October's incentives were $1,632 per vehicle, breaking the record of $1,534 in August. But the payoff came in higher market share. Edmunds.com estimates Toyota's October market share will be 19.1 percent, breaking the record of 18.5 percent in May.
The industry's aggregate incentive spending in October is estimated to have totaled approximately $2.3 billion, down 17.4 percent from September 2008. Chrysler, Ford and General Motors spent an aggregate of $1.46 billion, or 63 percent of the total; Japanese manufacturers spent $542 million, or 23.5 percent; European manufacturers spent $210 million, or 9.1 percent; and Korean manufacturers spent $104 million, or 4.5 percent.
Among vehicle segments, premium luxury cars had the highest average incentives, $8,344 per vehicle sold, followed by large trucks at $5,764. Subcompact cars had the lowest average incentives per vehicle sold, $393, followed by compact cars at $879.
Analysis of incentives expenditures as a percentage of average sticker price for each segment shows large trucks averaged the highest, 17.6 percent, followed by large SUVs at 12 percent of sticker price. Subcompact cars averaged the lowest with 2.5 percent and compact cars followed with 4.6 percent of sticker price.
Comparing all brands, in October Mini spent the least at $36 followed by Scion at $155 per vehicle sold. At the other end of the spectrum, Hummer spent the most, $5,587, followed by GMC at $4,889 per vehicle sold. Relative to their vehicle prices, Mercury and Hummer spent the most, 16.5 percent and 14.6 percent of sticker price, respectively; while Mini spent just 0.2 and Scion spent 0.9 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.
|
True Cost of Incentives for the "Big Six" Automakers |
|||
|
Automaker |
October 2008 |
September 2008 |
October 2007 |
|
Chrysler Group |
$3,598 |
$4,679 |
$3,105 |
|
Ford |
$3,758 |
$3,639 |
$3,205 |
|
General Motors |
$3,716 |
$3,957 |
$3,058 |
|
Honda |
$1,082 |
$1,054 |
$639 |
|
Nissan |
$2,016 |
$2,104 |
$2,117 |
|
Toyota |
$1,632 |
$1,374 |
$706 |
LEAVE A COMMENT