Production Cuts Help Lower July Incentives, Edmunds.com Estimates
August 02, 2009
Car buyers took advantage of incentives in July, but they came from the government through the Cash for Clunkers program more than from auto manufacturers, which actually lowered incentive spending from June, Edmunds.com estimates.
The average automotive manufacturer incentive was $2,735 per vehicle in July, down $134, or 4.7 percent, from June, and up $90, or 3.4 percent, from July 2008. Historically, incentives spending increased between June and July.
"Comparing June with July, incentives usually increase between $50 and $200 per car sold, but this year they are down $134 per car," said Jessica Caldwell, Edmunds.com's manager of Pricing and Industry Analysis. "The Cash for Clunkers frenzy has given automakers the opportunity to reduce their own investment in creating sales momentum, and to maximize profitability in the process."
Automakers cut production earlier this year to deal with then lower sales volumes. Now that sales have stabilized and are actually up due to the government's Car Allowance Rebate System (CARS) program, they can cut incentive spending to improve profit margins. Question is which will run out first - clunker money or the replacement cars people want to buy?
Caldwell explained typically increase from June to July as automakers lower transaction prices during the summer sell-down season. "With the exception of GM -- which increased presumably to regain sales momentum after emerging from bankruptcy -- incentives actually dropped this month."
In July, the industry's aggregate incentive spending is estimated to have totaled approximately $2.6 billion, up 5.6 percent from June, Edmunds.com estimates. Chrysler, Ford and General Motors spent an aggregate of $1.5 billion, or 56.6 percent of the total; Japanese manufacturers spent $640 million, or 24.5 percent; European manufacturers spent $275 million, or 10.5 percent; and Korean manufacturers spent $217 million, or 8.3 percent.
Edmunds.com estimates combined incentives spending for domestic manufacturers averaged $3,743 per vehicle sold in July 2009, up from $3,727 in June. European automakers increased incentives spending by $282 to $3,504 per vehicle sold; Japanese automakers decreased incentives spending by $153 to $1,591 per vehicle sold; and Korean automakers decreased incentives spending by $136 to $2,927 per vehicle sold.
Among vehicle segments, premium sport cars had the highest average incentives, $7,074 per vehicle sold, followed by premium luxury cars at $4,402. Subcompact cars had the lowest average incentives per vehicle sold, $1,371, followed by compact cars at $1,824.
Analysis of incentives expenditures as a percentage of average sticker price for each segment shows large cars averaged the highest, 12.9 percent, followed by large trucks at 12.7 percent of sticker price. Premium luxury cars averaged the lowest with 5.4 percent and sport cars followed with 5.9 percent of sticker price.
Comparing all brands, Scion spent the least at $294 followed by smart at $394 per vehicle sold. At the other end of the spectrum, Cadillac spent the most, $6,165, followed by Hummer at $5,891 per vehicle sold.
Relative to their vehicle prices, Pontiac and Hyundai spent the most, 18.9 percent and 15.9 percent of sticker price, respectively; while Scion spent 1.7 and Lexus spent 2.7 percent.
"Hyundai demonstrates it is willing invest in taking market share from automakers seeking better margins," said Caldwell said. In addition, Hyundai kicked off cash for clunkers three weeks before the official launch by providing its dealers with cash advances for the money the government would reimburse. Hyundai's early results showed it grealty benefited from the CARS program.
"We could see another first this month, with Hyundai overtaking Chrysler in market share," said Caldwell.
|
True Cost of Incentives for the Top Seven Automakers |
|||
|
Automaker |
July 2009 |
June 2009 |
July 2008 |
|
Chrysler Group (Chrysler, Dodge, Jeep) |
$4,366 |
$4,904 |
$4,022 |
|
Ford (Ford, Lincoln, Mercury, Volvo) |
$3,343 |
$3,537 |
$3,202 |
|
General Motors (Buick, Cadillac, Chevrolet, |
$3,884 |
$3,429 |
$4,063 |
|
Honda (Acura, Honda) |
$1,255 |
$1,743* |
$1,279 |
|
Hyundai (Hyundai, Kia) |
$2,927 |
$3,063 |
$2,132 |
|
Nissan (Infiniti, Nissan) |
$2,715 |
$2,581 |
$2,445 |
|
Toyota (Lexus, Scion, Toyota) |
$1,327 |
$1,341 |
$1,243 |
|
Industry Average |
$2,735 |
$2,869 |
$2,645 |
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 5:58 PM under Analysis , Companies | Comments (0) | digg this | Seed Newsvine
Leave a comment