Chrysler Bumps Incentives. Again. Still.

Edward Niedermeyer
by Edward Niedermeyer
Despite already having some of the highest incentives in the game right now, Chrysler is joining GM in putting more cash on the hood to clear out year-end inventory. Automotive News [sub] reports that Chrysler will be adding $1,000 to $1,500 in incentives per vehicle, on top of October’s $3,219 per vehicle average (as calculated by Edmunds). According to the same Edmunds analysis, the average industry incentive is $2,468 per vehicle. This continued reliance on incentives contradicts a number of Sergio Marchionne’s statements at the presentation of Chrysler’s five year product and business plan, in which he argued that Chrysler could not rely on incentives to push volume. Marchionne claims to believe the incentive-based volume chasing is “insane,” but his commitment to a sustainable business plan is about to be tested. For Chrysler’s five year plan to succeed, its sales need to turn around fast, making 2009 the trough year indicated on this graph. But with no new product (and by new product, we mean refreshed product) due out until the fourth quarter of next year, such a turnaround seems impossible without huge incentives. And yet Chrysler also showed graphs projecting a direct relationship between volume and profit, meaning there is little to no wiggle room for profit-sapping incentives. Rock, hard place, I’d like you to meet Chrysler Group.
Edward Niedermeyer
Edward Niedermeyer

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  • Stuki Stuki on Nov 22, 2009

    The whole MSRP and incentives charade when it comes to auto pricing is silly. Cars are bought to be used a given number of years, and the only cost that matters are the total cost of ownership over those years. To set MSRP, auto makers should consult ALG or something for estimated absolute residual, and offer to sell at X% depreciation over i years and j miles. Anything else is simply futzing around with ultimately meaningless numbers. But I guess they feel whatever it is they're doing, works better than the alternatives. To me, it simply looks like continued attempts at suckering suckers, which I believe will ultimately prove to be a losing business.

  • Raast Raast on Nov 22, 2009

    Residual (read trade-in or sale) value gets affected by this. It's great if you buy and drive into the ground, but for those that do not...

  • Boff Boff on Nov 22, 2009

    I'm not sure I see a contradiction with Sergio's 5-year plan...who doesn't jack up incentives to clear out inventory? This inventory would largely have been put in place pre-FIAT anyways. We won't truy know if Chrysler has kicked its addiction to incentives for some years...

  • Joe McKinney Joe McKinney on Nov 23, 2009

    The problem with Chrysler (and GM) is that they have relied on these crazy incentives for so long that even their most loyal customers will not buy without them. Everyone knows that if you wait a month or two you can catch the next end of the month, red tag, fire sale event.

    • Superbadd75 Superbadd75 on Nov 23, 2009

      Exactly. And don't even mention employee pricing and 0% financing. Everyone in the industry kind of screwed the pooch after 9/11 by throwing out crazy incentives to reboot the market. It hasn't been the same since then. Even Honda began offering cash incentives after that, when the most they had ever done before was special finance rates.