GM Still Leading The Incentive Race
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.
More by Cammy Corrigan
Comments
Join the conversation
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.
GM's resale value race to the bottom continues...