Automakers Reduce Leftover Inventory -- and Incentives, Edmunds.com Reports
By Michelle Krebs November 2, 2010In another sign that the U.S. auto industry is returning to something resembling normalcy, automakers are following their typical pattern: they are winding down inventory of vehicles from the past model year and ramping up stock of the new ones, which allows them to scale back some on incentives at this traditional start of the new model year.
"It's typical to see a dip in average incentives this time of year since the older and more heavily discounted models no longer make up the bulk of new cars sold," said Jessica Caldwell, Edmunds.com's director of Industry Analysis for Edmunds.com. About 53 percent of vehicles sold in October were the new 2011 models, compared with 37 percent last month, according to Edmunds.com's analysis.
Edmunds.com estimates the average automaker incentive in October dipped from a year ago as well as from September. The is estimated at $2,498 per vehicle sold in October, down $61, or 2.4 percent, from September and down $172, or 6.4 percent, from October 2009.
According to Edmunds.com, combined incentives spending for domestic manufacturers averaged $3,200 per vehicle sold in October, up from $3,135 in September. From September 2010 to October 2010, European automakers decreased incentives spending by $59 to $2,374 per vehicle sold; Japanese automakers decreased incentives spending by $244 to $1,860 per vehicle sold; and Korean automakers increased incentives spending by $5 to $1,611 per vehicle sold.
In October 2010, the industry's aggregate incentive spending is estimated to have totaled approximately $2.3 billion, down 6 percent from September 2010. Chrysler, Ford and General Motors spent an aggregate of $1.3 billion, or 57.9 percent of the total; Japanese manufacturers spent $649 million, or 28.3 percent; European manufacturers spent $207 million, or 9.0 percent; and Korean manufacturers spent $112 million, or 4.9 percent.
Of the Big Six automakers, Chrysler sold the highest percentage of 2010 model year vehicles in October, 71 percent, while GM sold the highest percent of 2011 model year vehicles in October, 70 percent. GM's 2010 models are typically discounted by $2,245 more than GM's 2011 models, while Toyota only offers $793 more for a 2010 model year. That probably explains why Toyota is having a harder time clearing out its old inventory. Only 45 percent of new Toyotas sold in October were from the 2011 model year.
By Segment
Among vehicle segments, premium sport cars had the highest average incentives, $6,068 per vehicle sold, followed by premium luxury cars at $5,580. Subcompact cars had the lowest average incentives per vehicle sold, $1,192, followed by sport cars at $1,319.
As % of Sticker
Analysis of incentives expenditures as a percentage of average sticker price for each segment shows large cars averaged the highest, 12.7 percent, followed by large trucks at 11.1 percent of sticker price. Sport cars averaged the lowest with 3.6 percent and luxury SUVs followed with 4.3 percent of sticker price.
By Brand
Comparing all brands, in October Mini spent the least on incentives per vehicle at $349, followed by Subaru at $474 per vehicle sold.
At the other end of the spectrum, virtually out-of-business Hummer spent the most, $5,541, followed by struggling Saab at $5,403 per vehicle sold.
Relative to their vehicle prices, Mercury, which is being eliminated by parent company Ford, and Saab spent the most, 16.1 percent and 13.7 percent of sticker price, respectively. Spending the least based on vehicle price, Mini spent 1.3 percent; Subaru spent 1.8 percent.
Source: Edmunds.com
Edmunds.com's monthly True Cost of Incentives 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.
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