By on May 6, 2013

Altima-side-550x412

One of the bigger stories of 2013 has so far managed to escape the news cycle. I’m not exactly sure why Nissan’s announcement of significant reductions on the MSRP of new cars hasn’t gotten more coverage, but I’m also not 100 percent sure of Nissan’s motives either.

The Canadian Press, one of the few outlets to cover the news, does a good job of not burying the lede here

Nissan is cutting prices on seven of its 18 models in the U.S., hoping its cars and trucks will show up in more internet searches by shoppers. The price cuts vary with the amount of equipment on each model. They run from 2.7 per cent, or $580 US, on the top-selling Altima midsize car to 10.7 per cent, or $4,400, on the Armada big SUV. Executives are under pressure to sell more cars, with Nissan’s CEO targeting a 10 per cent U.S. market share within three years.

Nissan is aggressively pursuing their marketshare goal with VW-like fervor; witness the revamp of almost all of their products, which have become even more oriented towards the tastes of American consumers (if such a thing were possible). The Altima, once the original Japanese mid-size muscle sedan, is now just another generic entrant, while the Pathfinder, criticized by armchair off-roads for becoming a crossover, is pretty good at fulfilling its duties as a family hauler that looks like an SUV.

Apparently, Nissan felt that the sticker prices of their cars were too high to be competitive in online car shopping searches. Nissan must want to get in front of consumer eyeballs badly enough to incur the massive pain-in-the-rear that comes with such a move. Since the discounts only apply to cars about to be shipped to dealers (and extended indefinitely), cars currently sitting on dealer lots will get some serious incentives to help dealers move them.

Our industry sources tell us that this will cost Nissan about $100 million, about the same price tag as a new model development program for many manufacturers. This is not a small expenditure, even for a firm as big as Nissan. But it does highlight the importance that many manufacturers are placing on volume, which, in the absence of decent margins, is seen as the way to make money building cars.

 

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38 Comments on “Why Is Nissan Cutting Prices?...”


  • avatar
    thegamper

    I am on my second Nissan in the past 10 years. Got my wife a last gen Pathfinder (I wanna say it was an 05, dont have it anymore) I am currently driving a 2011 Maxima. I have done a lot of car shopping (leasing and purchasing) and I have to say that Nissan is crazy aggressive in its pricing once you are in the dealership. Both times I pulled the trigger on a Nissan even though it was a ways down on my shopping list and both times they simply made an offer I couldnt refuse just to keep me from walking out of the dealership. Easily beating the prices I had compiled on my other prospective vehilces. Also very generous trade in cash.

    I am not sure how they do it, I dont care. But my take on this is the new prices simply reflect something closer to the average transaction prices the vehicles are selling for. Which begs the question, there are lots of stories and information about incentive spending by manufacturers. It makes me wonder if some manufacturers are not reporting or somehow disguising incentive spending to save face in the auto news cycle and keep residuals high. Both my purchases were through Nissan/Infiniti Motor Accept, so perhaps incentivized through the finance arm??

    • 0 avatar
      segfault

      The incentives and price cuts are really a double-edged sword. If they do it enough, consumers may begin to believe the product is substandard because they have higher levels of incentives relative to the competition.

      Already, Consumer Reports has ranked the 2013 Altima midpack amongst midsize sedans, whereas the 2007-12 version was at the top of the rankings.

      • 0 avatar
        danio3834

        It depends. If they’re slashing prices on Infinitis, yes the perceptions could matter.

        No one is buying Versas, Sentras, and base Altimas for the prestige. In the case of the first two, it’s because their only other choice was Kia.

      • 0 avatar
        Luke42

        Depends on the consumer and the product.

        Playing games with perceived value just pisses me off, at least when I know enough about the product to detect it. Just sell me a quality product that I’m looking for at a fair markup and it’s all good.

        I’ll never buy a badge engineered luxury car…

    • 0 avatar
      jimmyy

      The answer: Nissan is cutting prices because the Japanese Yen is getting weaker. Toyota and Honda should be cutting prices shortly for the same reason.

      Since 2008, Ben Bernanke has been printing money. That caused the Japanese Yen to strengthen, which did a lot of damage to the Japanese car industry while allowing Detroit automakers to make a profit by raising their car prices. However, this little form of Government support to Detroit is ending. The Japanese are fed up with Ben Bernanke. Part of the strategy of Ben’s money printing is the support of Detroit … and all Americans suffer with higher car prices. But, the UAW has benefited.

      Truth is, even with the Japanese weakening the Yen in order to repair the damage Ben did to the exchange rate, it has to drop another 15% to put it back to where it was before Ben started printing. This is good for the American car buyer, since Japanese auto prices will drop further. Detroit will be shedding tears and wrapping themselves with the American flag in order to convince you how unfair the Japanese are.

      • 0 avatar
        Luke42

        And the result of this monetary uncertainty is that Japanese car makers (at least Toyota and Nissan) have been building more smaller plants that are closer to customers.

      • 0 avatar
        thegamper

        The Federal Reserve’s QE programs have not caused the dollar to weaken relative to the yen. Not yet anyway, Inflation in the US is is extreamly tame despite the Quantitative Easing program only because there are simply not enough safe havens for the worlds money. When the world economy shapes up people will stop buying treasuries at negative yields and then we will see inflation…probably. The yen has strengthened not due to actions in the US but because Japan is in a deflationary spiral. Japan is playing a very dangerous game because they have the highest debt to GDP ratio in the developed world. A rather small increase in Japanese debt yields will result in a situation where they are paying more to service their debt than they collect in taxes. Not good.

  • avatar
    mike978

    Have they lowered their invoice prices as well? Or are they just squeezing the dealer? I ask because the Altima has typically a $2000 spread between MSRP and invoice, whereas something like the Mazda 6 is around $1300.

    Nissan have been very aggressive, with discounts of over $4K achievable on the Altima. They are also the only company I can think of that competes in every category from sub-compact to large cars, trucks to minivans.

    • 0 avatar
      Secret Hi5

      I don’t think it matters because I’m sure the prices being cut are for the most basic trim without any options. You know–The ones that nobody actually buys, but are there for luring buyers into showrooms.

      • 0 avatar
        Scoutdude

        I agree that it is most likely that only the base models will see those discounts and they will be far and few between on dealer lots. It also wouldn’t surprise me is some of the previously standard equipment became optional.

      • 0 avatar
        segfault

        The last time I was in a Nissan showroom, they had a base Altima 2.5 on the showroom floor (*not* the 2.5S which is the one I see most frequently in rental fleets). Plain hubcaps, rubber steering wheel, no exhaust finisher, no cruise control, no keyless ignition. The dealer had put aftermarket leather seats on it and it looked mighty weird.

    • 0 avatar
      aircooledTOM

      I sold Nissans at a large-ish multi-make dealership for about 3 years. When I sold Nissans (instead of Cadillac, GMC, Buick, Mitsubishi, or Lincoln/Mercury) I typically sold them at invoice. The markup on the car is irrelevant. Often just to put a deal together we’d do a couple hundred under, just as long as we had some hold-back to cover us. If you make your sales goals as a Nissan dealer there are very worthwhile incentives that come down from the manufacturer. It’s all about volume.

      Great cars though. But that said, I’m not too fond of the Altima redesign, looks like a cheap Kia.

  • avatar
    eggsalad

    I stopped by the Nissan dealer yesterday. I like car shopping on Sundays.

    Just like every other dealer in Vegas, every Nissan had an ADM sticker on it. $2300 for the “Desert Protection Package”, which amounts to $30 worth of chemicals applied by a $10/hr lot guy.

    When I get around to buying a new car in 4 years, I’ll drive to LA. It’s a 4-hour drive, but at least I’ll get to negotiate from sticker, not some inflated ADM.

    • 0 avatar
      bball40dtw

      When I lived in Tucson, every dealer had that too. Is it a desert Southwest thing? I guess I order cars via A-plan now, so I cut significant amounts of BS out of the sales process.

      I don’t remember VW or Toyota dealers in Detroit trying to sell the “Post-Apocolyptic Potection Package”, but maybe they should.

    • 0 avatar
      golden2husky

      Are people stupid enough to pay for such crap?

    • 0 avatar
      TMA1

      Last time I walked through a Nissan dealer in the DC area, they had $3,000 ADM on every single car. At least the nearby Hyundai dealership was giving you pinstripes and door edge guards for that price.

      I assume that that Nissan dealer’s ADM just comes with a big middle finger to the customer.

  • avatar

    This was widely reported. I read about it at Autoblog before TTAC. As for MSM burying the stories, well, if John Edwards’ Love Child teaches us anything, it’s this.

    • 0 avatar
      danio3834

      I saw it on Automotive News a litle while back. It didn’t strike me as the news of the century, but a good indication that competition is heating up a bit.

  • avatar
    slavuta

    First, Nissan need to make folding mirrors a standard equipment on Altima. Then, I may show up at their dealer.

  • avatar
    Lichtronamo

    Nissan’s MSRP always seemed to be above that of the main competition in a segment – what you paid was considerably less. Maybe in the past that gave you a sense that you got a better deal. However, in this internet research age, it is probably harder to get people into the dealerships to make that deal until after they’ve really narrowed choices. On a related note, passed a Pathfinder on the freeway this weekend – given what this vehicle ended up being I’m disappointed they kept the Pathfinder name as it doesn’t look much like an SUV anymore. Ford, GM, Chrysler and Honda did a more convincing job with the Explorer, Lamda triplets, Durango and Pilot, respectively, at making a CUV look like an SUV, and the Highlander and CX9 are better lighter-looking designs.

  • avatar
    parabellum2000

    I don’t really think it matters. I recently considered a Nissan Juke SV. MSRP over $23,000 invoice over $22,000 (can remember exact numbers), within a day of e-mail all the dealers in my area, I had 3 agree to sell a new one for $18,500. That included $750 in rebates.

    People who don’t comparison shop are going to get stuck for MSRP plus dealer bumps like pin stripes and lifetime wax. People who shop around will get far below either MSRP or Invoice on commodity cars.

    I compared several different vehicles and Nissan dealers came off MSRP faster than Mazda, Ford, VW, and surprisingly Hyundai.

  • avatar
    Syke

    Check today’s Wall Street Journal. Quite an article about how the Japanese midsize sedans don’t have the automatic advantage against the American and Korean offerings anymore. And they spend a bit of time on the Nissan price cut.

  • avatar
    eastaboga

    It’s volume, volume, volume, and if Nissan is going to not only hold onto their market share in hot segments like mid-size sedan and small crossover, but actually try to grow it, then they’ll have to use every piece of ammo they have including price cuts. I still think the Altima is a decent engine with some tinfoil wrapped around it. The levels of NVH and interior materials are simply not class competitive (unless the class is Subaru).

    Derek, Nice pic, though, from 33rd Ave. in Nashville (aka Nissan-town)

  • avatar
    maxxcool7421

    It is because their stagnant atm. They compete with Toyota and Toyota has gone so bland it’s a ‘meh’ field to buy from. the only thing you can do is drop the price.

    .

  • avatar
    mvlbr

    With Nissan’s current styling you couldn’t pay me to buy one.

  • avatar
    Robstar

    Am I the only one who finds absolutely nothing that Nissan makes interesting? Nothing stands out at me…

    • 0 avatar
      bd2

      Nissan used to be the “sporty” Japanese brand but that mantle has been taken over by Mazda.

      The Altima, Sentra and Versa are now all “dumbed down” models meant to appeal to the typical daily driver (i.e. – the typical Toyota buyer).

      While the Z and GT-R are the exceptions, Nissan is a pale version of its former self.

      • 0 avatar
        noxioux

        +1

        The only things they offer that are remotely interesting are the Z and the Xterra.

        I’m a die-hard Nissan fan, for the most part, but nothing on their lot catches my eye anymore. I liked the writeup of the 6-speed Juke in Automobile awhile back, but try finding one.

        Since they turned the Pathfinder into a bloated station wagon and decided to put those nasty snowmobile transmissions in everything. . . well Nissan can just suck it.

        Give us a decent 6-speed Maxima, and maybe we’ll talk. Meanwhile, my 06 Miata is swiftly turning me into a Mazda fanboy.

  • avatar
    bd2

    Really not going to make much of a difference aside from hits on internet searches.

    Nissan has been pretty heavy on the incentive spending (even on newer models like the Altima) so the cut in MSRP will just mean a little less in incentive spending with the outcome being the same when it comes to what buyer ends up paying.

  • avatar
    nickoo

    Too bad Nissan didn’t cut the price on the 370Z, if any of their cars is in need of a price cut, it’s that one. Should start in the mid 20s.

  • avatar

    I was wondering about this I was actually wondering why prices aren’t dropped more often to look more competitive rather than piling on incentives that may not show up in online searches. I used to do internet sales for a boat dealership and let me tell you there are lots of buyers unaware of how a new vehicle purchase works and the MSRP will drive them to the other dealer.If I go on Dodges website right now it looks like a Darts a lot cheaper than an avenger in actuality they are very similar in price.

    • 0 avatar
      Luke42

      Agreed. And even those of us who have an inkling may not want to bet on our haggling skills when the dealer across the street has posted what we want for a.better price…

  • avatar
    Junebug

    My wife and I use to buy a new Nissan every year cause we liked the new car thing and as long as we stayed with Nissan, we kept the same payments. I guess it was like a 1 year lease without the lease. But, try to sell or trade them for anything else, you’ll get your feelings hurt!

  • avatar

    “about $100 million, about the same price tag as a new model development program for many manufacturers”

    Not sure about this.


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