By on February 5, 2010


Incentives are a tricky hand to play. On one hand, you can’t be mean in putting cash on hood, because you want to bring customers into your showroom. On the other hand, too much cash on hood, looks bad and in the long term, it’s proven to be bad for business. So, Edmunds’ January 2010 incentive figures for the United States [release via benzinga.com], were a very interesting read.

GM spent an average of $3103 per vehicle in incentives in January 2010, higher than the industry average. The majority of that spend comes from trying to offload what is left of Saturn and Hummer stock. This will present a problem to GM’s current CEO, Ed Whitacre, who said that reducing incentive spending was one of his top priorities. Even Susan Docherty wants this practice to be reined in, kind of. She said “We want to make sure as we look forward, that we’re using incentives on a judicious basis.” More of your tax dollars working hard. Jessica Caldwell of Edmunds also had another take on GM’s high incentives, “January incentives were not particularly generous or compelling — until some automakers began trying to conquest unsettled Toyota owners and shoppers late in the month,” she said.

In second place, was Ford with $3095 per vehicle. In third place, was Chrysler with $3061 per vehicle. It’s also interesting to note that out of the Detroiters, GM was the only one to reduce their incentives from last month. The other two in increased their incentives. Another 2 companies who increased their incentives from last month were Hyundai (December: $2027, January: $2096) and Nissan (December: $2157, January: $2455). Wait a minute, GM, Ford, Hyundai and Nissan all had higher (and some of the highest) incentives in January 2010? Remind me, again, who posted gains in sales for January 2010?

As per normal, Toyota and Honda reduced their incentives from last month (Honda: December: $1253, January: $1203. Toyota: December: $1665, January: $1550), all well below the industry average of $2382. However, Toyota and Honda also announced recalls in January which may hurts sales, so next month’s incentive figure will be interesting to see whether Toyota and Honda increase their incentives.

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16 Comments on “GM Still Leading The Incentive Race...”


  • avatar
    Ryan

    Wow…

    GM and Ford are carrying heavier discounts than Crapsler? I realize we are talking about less than $100.00, it just caught me by surprise.

  • avatar
    ponchoman49

    GM’s average incentive spent on each vehicle of course was due mainly to 3 brands being fazed out. Pontiac, Saturn and Hummer incentives were racked up to near giveaway status towards the end to clear out inventory as stated. The tables will be considerably different when this Toyota fiasco reaches a climax and many owners offload these to the used car lots and sales of new models will be harder. And speaking of our tax dollars hard at work I would rather see these taxes used as loans to save what vestage of our industry is left to preserve jobs right here in America than bail out careless banks, extend and support endless welfare programs, fix an unfixable healthcare system, rebuild roads and bridges that really don’t need rebuilding, giving out money to other countries to climb on board with our relentless pursuit of ficticious Global Warming, installing cameras on all our highways to the tune of millions and a book full of ways our government wastes money with pork barrell spending! I watch state and federal money being wasted on a daily basis. Before we start writing off Detroit as wasters of our tax dollars we should all get jobs with the state or government and watch how money REALLY gets wasted.

    • 0 avatar
      jaje

      Though the dead brands GM is closing down has contributed to increased incentives – GM still is well above average.

      As for whether Global Warming is true or not – we don’t know. We are having an effect on our planet but we still do not know how much of an effect it is. Denying it outright is completely shortsighted and quite a good analogy of the thinking (or lack thereof) GM has had that lead them into this mess.

  • avatar
    roadrabbit

    The data is sales-weighted so Hummer and Saturn are really a non-factor. Both sold in such small volumes that unless they each had $100,000/vehicle on the hood, they didn’t distort the GM average that much. The high incentives are GM’s valid attempt to increase share and cash flow when they see an opportunity. I don’t fault GM for this. It will be interesting to watch the incentives as (if) the economy improves. Also, watch GM as Toyota will greatly increases incentives to deal with the brake issue.

  • avatar

    The Corn, The Peas, and The Carrot

    herein lies the crux of the issue as to why GM has fallen, cannot get up, and only continues to survive per the gracious hospitality of Washington.

    kitchen table, recalls, and inspiration

    Mary and Lily don’t really like corn, or so they suppose. last night I made of point of letting them know we were having “special corn”, with extra butter and salt, yummmmm. there was only so much…they could only have a little. they focused on wanting more corn, oblivious to the quality of the ham. they just had to have more of that darn corn.

    now, let’s imagine a larger scale upon which customers were thinking corn, but undecided about possibly peas. furthermore, current pea production was restricted due to the size and friction within the pod. low and behold, there was a recall on the eight best selling brands of peas. as corn huskers, we could offer additonal discounts on our corn, or simply benefit by the increased demand for our product, given the vegetable void.

    coupon or carrot? vegetate on that for a minute and you’ll realize why GM sucks at marketing.

    • 0 avatar
      ASISEEIT

      G.M. might be selling “Buttered Up Corn” to the public while the “Peas” have hit a hard frost but they’re sure giving their retirees “The Cucumber”!

  • avatar

    It’s estimated that after discharging debt in the bankruptcy and after reworking the contract with the UAW that GM may now have as much as a $3,000/car cost advantage. They can do a few things with that differential- lower prices, upgrade product for a competitive advantage, spend more on marketing, increased incentives. The other option is to do none of the above, keep prices high and bank the profits. The wisest path is probably a combination of tactics.

    Since the majority of GM’s increase in incentives has to do with clearing out remaining stock on the dead brands, I don’t see this as a problem. Let’s see what the figures are after Saturn, Hummer and Pontiac are shuttered.

  • avatar
    KixStart

    Are these sales-weighted? If so, the low volume on Hummer, etc, keep their high incentives from dominating GM’s numbers and, yes, GM’s incentives are rather high. If not, maybe this isn’t a big problem. On the other hand, didn’t GM report 30% fleet sales? That ain’t good.

    Edit: Oops… I see I overlooked Roadrabbit’s comment. Sales-weighted, eh? Ouch.

  • avatar
    raast

    Has to do wonders for residual value.
    Between this and Toyota’s meltdown…Hyundai’s looking REALLY good right now.

    Memo to Hyundai: “Watch and learn.”

  • avatar
    jaje

    Hyundai has lots of incentives and sells quite a bit to fleets – they maybe doing well but the true killers of your cars resale value are those two tactics.

    • 0 avatar
      raast

      Not only do Hyundai’s initial prices eclipse many of the rest outright, the build quality is impressive. Long term reliability is something yet tbd. Bang for the buck that’s bottom line, all this stuff is pretty much in the appliance category right now. Dealer customer service here is excellent, which is more than I can say for a lot of the competition. If anyone is thinking “Pony”, best have another look at fit and finish in 2010. Interesting to note “Made in Japan” on a number of assemblies, as opposed to the equivalent of “Made in Hurry” on my latest and last GM product.

    • 0 avatar
      Juniper

      Chicago area Hyundai dealers offering $500 under invoice on remaining 09s. How many could they have and do they have so many they have to advertise and discount to get rid of them this late? Did they just pack their dealers full? I think that is called channel stuffing when applied to detroit.

    • 0 avatar
      raast

      I’d say this sums it up

      “…January 2010’s figures is a low 7.9 million units, down from the already low 8.8 million units projected last January…”
      from
      http://www.thecarconnection.com/marty-blog/1041892_j-d-power-auto-sales-start-slow-in-2010

      But it’s simply down to “make your best deal” as far as the consumer goes. Just do the homework and forget the marketing hype.

    • 0 avatar
      jaje

      The point is missed (and this applies to all automakers not just the D3 or Hyundai) – high incentives have greater than a $ for $ decrease in the resale value of your car.

      For instance, a $25k MSRP Malibu with $3-4k in incentives automatically reduces the cars resale value by the amount of the incentive and in reality more so that car is now worth $20k with 1 mile on the odometer by the new owner. In addition to incentives, GM sells ~ 30% – 40% of its Malibus to fleets (one is a direct sale and shipped immediately to them – the 2nd is dealer fleet sales where these sales are not counted as “fleet” at mothership GM b/c a dealer sold them. In the short run it props up sales numbers – does help a little with economies of scale keeping the plant open. However, 2-3 years down the road my 2-3 year old Malibu has still not broken even from my 60 month 0% financing and add on top I’m competing to try to sell my car with off fleet models that are immediately liquidated into wholesale auctions. Now I can no longer afford to be in the new car market for another 1-2 years until I’m no longer carrying negative equity. On top of all that – a lot of people bought these cars that did not have the right credit – credit rules were relaxed to sell cars (I’ve literally watched a Honda/VW dealer turn down a buyer b/c of bad credit to watch them walk over to a Ford dealer and buy a similarly priced car – their credit didn’t improve from walking 100 yards!)

      My point is that this is what Hyundai is setting itself up for as the D3 have been hit hard by it and another case is Mitsubishi which relied on big incentives, loose financing and fleet sales to grow their market share. Now Mitsubishi is a former shell of itself (just like the D3) and is trying to turn things around just as the D3 are too.

      In reality – buying a new car is one of the most expensive and biggest losses of money you can do – that and modifying your car as you get almost nothing back for those upgrades and actually your resale value drops b/c it is assumed a modified car is abused.

  • avatar
    ronin

    Incentives are one part of the formula to determine the price of the item, and can’t be looked at in isolation.

    If the sticker price or deal price of an item is too high for the market, the item won’t sell. The mechanism for bringing down the price to the point where consumers start to buy the product, at least the mechanism used in the new car world, is the ‘incentive.’

    If the product is less desirable, the market says it is not willing to pay as much. If the seller unwisely offered the product at too high a price, they must offer a greater incentive.

    So if GM has too high of an MSRP for the market, of course they need a higher incentive. Fantasy pricing meets the real world when a deal is made.

    So cross-check MSRP across brands, cross-check residual values, and then we can more readily compare whether an incentive is high or low.

  • avatar
    vento97

    GM’s resale value race to the bottom continues…

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