By on August 3, 2010

Nissan may have broken its own incentive record last month, but it was GM that blew the lid off the competition. According to Edmunds’ True Cost Of Incentives Index, The General loaded up nearly $1,000 more in incentive spending compared to its closest competitors, and killed the industry average by $1,340. Combined, Detroit spent $1.7 billion, or 57.3 percent of the total incentive expenditures last month. And according to Edmunds,

Analysis of incentives expenditures as a percentage of average sticker price for each segment shows large cars averaged the highest, 13.5 percent, followed by large trucks at 12.4 percent of sticker price. Premium luxury cars averaged the lowest with 3.5 percent and sport cars followed with 3.9 percent of sticker price.

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22 Comments on “GM Kills The Competition… In July Incentive Spending...”


  • avatar
    Cammy Corrigan

    I was going to say something like “It’s all on the government so go mad”, but I’m going to say something else.

    Ford are the only ones who DIDN’T take taxpayer money (you know what I mean!). So can someone explain why their incentives are so high and where the hell are they getting the money to finance it?

    • 0 avatar
      NulloModo

      Cammy –

      The only thing that Ford has really big incentives on right now are discontinued Mercury models, and pickup trucks. The Mercury stuff is self explanatory, better to move it with slightly increased incentives now than have to sell it for ridiculous discounts once the brand is gone.

      The pickup truck incentives are a bit counterintuitive. Why would Ford put big incentives on his best selling model? Most of it comes down to allowing for upfits and over-advance for financing. If Ford raises the MSRP by $3k then puts $3k worth of rebate on top of the truck, the net result is breaking even, but it allows customers to effectvely finance an extra $3k worth of equipment with the truck and still keep the advance under 100% of MSRP. Ford is also clearing out remaining 2010 Super Duty trucks with up to $8000 rebate, so we have a situation where a couple big selling models with big rebates skew the numbers for the entire line, even though for most of Ford products the incentves are less than those of GM, Chrysler, or Toyota.

    • 0 avatar
      Cammy Corrigan

      Nullo,

      I’m not denying what you’re saying (after all you work for the blue oval boyz, right?) but it doesn’t make sense.

      Last month, Ford had high incentives* and the month before that**. In fact, as far I can remember Ford have always had high incentives.

      But like I say, what do I know…?

      P.S. Mercuries should fantastic bargains now! Fairly cheap and they always rated highly in terms of reliability, no?

      * = https://www.thetruthaboutcars.com/gm-tops-june-incentive-spending/
      ** = https://www.thetruthaboutcars.com/detroit-tops-may-incentives-residuals-rise-regardless/

    • 0 avatar
      NulloModo

      Cammy –

      Ford, GM, and Chrysler are always going to have higher average incentives in the US market as long as they make a lot of their business on full size trucks. Full size trucks have to be artificially price inflated then highly incentivized for financing reasons for business customers, as I mentioned above, it’s just part of the game. Ford has had on average lower incentives than GM or Chrysler for the past year due to cutting incentives back on passenger cars and CUVs that can stand on their own merits and don’t need them.

  • avatar
    Da Coyote

    We gots to move those refrigerators…

    We gots to move those color TVs….

  • avatar

    Gotta reduce that HUMMER, Pontiac, Saab and Saturn inventory somehow. But last I checked Pontiacs were pretty much entirely sold out save for some remaining Solstices and G8s.

  • avatar
    educatordan

    So if Nissan sets a record for the company at less than $3,000 and GM at over $4,000 doesn’t set a record, what would be a record for the General? Seeing stats like that put’s things into pretty stark relief for me.

  • avatar
    MikeAR

    Don’t blame this on discount sales of all the remaining non-core brands vehicles. There aren’t that many left. No wonder their sales were up for the month.

    GM should admit defeat and realize that their prices are just too high. Drop everything across the board by $4-5k and see what happens. The market is saying too high and GM should listen. If it turns out that that isn’t enough to get market share, well then guess we just wasted a lot of money on a hopeless cause.

  • avatar
    SherbornSean

    Still have to respect the job Chrysler is doing to reduce incentives. They are lower than Ford, and if they keep it up, will soon be below Nissan. I still don’t get how they can be adding a shift to produce more Sebrings/Avengers…

    • 0 avatar
      windswords

      The Sebring is do for a heavy update: sheet metal, interior, suspension, etc. The factory has to be ready for the (hoped for) increased sales. There is a lot of lead time in the auto biz. Also, just an improving economy will mean more sales even if the product is the Sebring, and even if it’s just rentals.

      As for incentives, Chrysler is doing very well considering the place they are in. They don’t get enough credit.

  • avatar
    gslippy

    I’m still a fan of no-haggle pricing. With the demise of Saturn, I think Scion is the only one left doing this (although Edmunds reports Scion incentives also). Trade-ins remain negotiable.

    MSRP is a joke, while incentives, subsidies, rebates, and financing gimmicks only cloud and uglify the purchasing experience. I want to buy cars at Wal-Mart.

    The incentive difference between the Big 3 and the ‘imports’ is probably equal to the UAW cost differential (or about $1166 in non-volume-weighted math).

    GM can’t keep up this pace, and I doubt that Ford and Chrysler can, either.

  • avatar
    SkiD666

    ‘Average Incentives’ by themselves mean nothing.

    You need to take into account ‘Transaction Price’ and ‘Profit’ to understand a particular manufacturer’s health.

    GM and Ford have a lot higher average Transaction Price than most of the mainstream automakers selling cars in the US, which means that their average Incentive will of course be higher (higher price means higher interest subsidy).

    In the end the only number that really matters is profit (we know Ford is making money and we will know in a couple of weeks where GM is at).

    • 0 avatar
      Telegraph Road

      Absolutely. A hypothetical $3,100 rebate on a $31,000 F-150 (Ford’s top seller) is no worse than a $2,200 rebate on a $22,000 Camry (Toyota’s top seller)–especially if the F-150 is much more profitable. Without corresponding average sale prices and profit numbers, the unit incentive numbers are not informative and potentially misleading.

      And certainly Edmunds must know sticker prices since the release says…
      “Analysis of incentives expenditures as a percentage of average sticker price for each segment shows large cars averaged the highest, 13.5 percent, followed by large trucks at 12.4 percent of sticker price. Premium luxury cars averaged the lowest with 3.5 percent and sport cars followed with 3.9 percent of sticker price.”

      It’s a mystery why Edmunds doesn’t show the same analysis (i.e. incentives as a percentage of sticker price) by vehicle manufacturer. It certainly is more informative than average unit incentives (i.e. incentives per vehicle sold).

  • avatar
    Steven02

    I am confused by a few lines in the article.

    “Automakers had varied strategies in their model-year end clearances. Nissan stood out in July as the biggest spender, much of it on leases. Nissan had its highest lease percentage ever, according to Edmunds.com’s analysis. In contrast, GM used more dealer cash than usual to sweep older models out of inventory.”

    How does the data show that Nissan was the biggest spender? Is this a misprint or is the data a misprint?

  • avatar
    Rod Panhard

    GM will have to sell a LOT of vehicles in China to offset those costs.

  • avatar
    daga

    Agreed – Let’s see some ATP charts too.

  • avatar
    dhathewa

    It would be helpful to track something more meaningful, like real transaction prices.

    I imagine that would be tough to get and I expect the automakers are not motivated to be too helpful.

    • 0 avatar
      Telegraph Road

      Transaction prices must be more widely available than incentive prices, since transaction prices determine state sales tax revenue. If Edmunds can provide the latter, it certainly can provide the former.

    • 0 avatar
      NulloModo

      Transaction prices won’t tell you too much from the manufacturer’s POV. Once the OEM sells the car to the dealer any profit or loss from that point on is on the dealer, not the OEM, aside from public knowledge rebates*.

      If Ford sells Fusions to dealers for 6% below MSRP, and offers a $2000 rebate on each one, it doesn’t effect Ford’s bottom line whether the Fusions are sold at invoice, MSRP, or $1000 above or below either of those numbers. The dealers are the OEM’s customers, not the actual people buying the cars to drive them.

      *The one caveat here is that some manufacturers, and Toyota is awful about doing this, have a ton of hidden incentives and cash sent directly to the dealer that is never disclosed to sites like Edmund’s, nor to the actual people buying the cars, and it muddies the waters considerably. Also granted, if the average transaction price means the dealers aren’t making much on the cars, they may lobby for increased incentives to improve their bottom line, but that doesn’t mean they’ll get them.

      The actual useful information would be profit per model from OEM to dealer including the effects of incentives, but fat chance of getting anyone to ever divulge that information.

    • 0 avatar
      Telegraph Road

      “…but fat chance of getting anyone to ever divulge that [profit per model] information.”

      Indeed.

  • avatar
    ronin

    Incentives are not an aberration on the true price of a product.

    Incentives ARE the true market price of a product.

    MSRP- the attempt by the vendor to set the price in a market having a lot of choices- are the aberration of the true price.

    All the incentives do are reduce the artificial wish price sticker to a point where the product can actually sell.

    Wishing incentives will go away is neither here nor there. The automakers don’t get to set the prices anymore, the customer does. The market hath spoken.

  • avatar
    jaje

    GM can sell their product at MSRP, however GM will sell much less of them. Add to the fact they have a high percentage of fleet sales and we are back to the same problem. GM still also has the UAW cancer that will want more for doing less.

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