Automakers Boost Incentive Spending, Edmunds.com Says
February 03, 2009

SANTA MONICA, Calif. - Automakers, in an effort to clear out old inventory and pare rising stockpiles of unsold cars, boosted incentive spending dramatically from a year ago, according to estimates calculated by Edmunds.com , parent of AutoObserver.com .

"Automakers need to clear out leftover inventory from the 2008 model year, and that effort is boosting the average incentive cost for the industry," said Jesse Toprak, Edmunds.com's executive director of Industry Analysis. "Last month, 27 percent of all new vehicles sold were from the 2008 model year while during January 2008, only 12 percent of new vehicle sales were from the previous model year's inventory."

The average automotive manufacturer incentive in the U.S. was $2,714 per vehicle sold in January 2009, down $148, or 5.2 percent, from December 2008, and up $301, or a dramatic 12.5 percent, from January 2008, according to Edmunds.com.

Still, the incentives are expected to have little impact on sales. Edmunds.com forecasts January's U.S. car sales will come in at a weak 730,000 units, down 18 percent from very weak sales in December and 30 percent from last January.

The Incentives Breakdown 

Combined incentives spending for domestic manufacturers averaged $3,438 per vehicle sold in January, down from $3,709 in December 2008, according to Edmunds.com. From December 2008 to January 2009, European automakers increased incentives spending by $329 to $3,297 per vehicle sold; Japanese automakers increased incentives spending by $27 to $1,775 per vehicle sold; and Korean automakers increased incentives spending by $197 to $2,963 per vehicle sold.

In January 2009, the industry's aggregate incentive spending is estimated to have totaled approximately $1.9 billion, down 22.4 percent from December 2008. Chrysler, Ford and General Motors spent an aggregate of $1.1 billion, or 57.5 percent of the total; Japanese manufacturers spent $532 million, or 26.8 percent; European manufacturers spent $203 million, or 10.3 percent; and Korean manufacturers spent $108 million, or 5.5 percent.
 
Among vehicle segments, premium sport cars had the highest average incentives, $5,297 per vehicle sold, followed by premium luxury cars at $5,213. Subcompact cars had the lowest average incentives per vehicle sold, $501, followed by compact cars at $1,422. Analysis of incentives expenditures as a percentage of average sticker price for each segment shows large trucks averaged the highest, 13.7 percent, followed by large cars at 11.9 percent of sticker price. Subcompact cars averaged the lowest with 3.0 percent and sport cars followed with 4.8 percent of sticker price.

Comparing all brands, in January Mini spent virtually nothing followed by Scion at $74 per vehicle sold. At the other end of the spectrum, Lincoln spent the most, $5,594, followed by BMW at $4,965 per vehicle sold. Relative to their vehicle prices, Kia and Mercury spent the most, 16.9 percent and 14.9 percent of sticker price, respectively; while Mini spent virtually nothing and Scion spent 0.4 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.

* Denotes a monthly record for the indicated automaker.

Source: Edmunds.com

Posted by Michelle Krebs at 4:04 AM under Analysis , Chrysler , Companies , Ford , GM | Comments (0) | digg this | Seed Newsvine

Technorati Tags: bmw, chrysler, edmundscomstruecostofincentives, ford, generalmotors, incentives, kia, lincoln, mercury, mini, rebates, scion