December Incentives Report: Detroit Dominates, But Imports Are Catching Up

by Edward Niedermeyer

January 4th, 2011 6:05 PM

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december incentives report detroit dominates but imports are catching up

As we wade through our year-end sales number reports, one of the important metrics that we’ll be looking at are incentive spending rates. Detroit continues to dominate both Edmunds’ True Cost of Incentives index (above) and TrueCar’s incentive forecast (after the jump), with little serious competition for their supremacy in this profit-sapping and brand equity-squandering category. Still, the foreign firms are increasing their incentives while Detroit has generally scaled back over the last year, so the incentive race is slowly getting tighter…

TrueCar’s incentive forecast (above) shows that Nissan in particular is approaching Detroit-like levels of cash on the hood, although discrepancies with the Edmunds numbers, particularly in regards to Nissan (the most-incentivized import) and Ford (the least-incentivized domestic), do muddy the picture a bit. And since only Emdunds offers year-end incentive numbers (below), that’s all we have to go on for a picture of the industry’s incentive activity in 2010. And those numbers definitely do show a narrowing of the gap between foreign and domestic automakers, with Detroit cutting back on incentives and the foreign firms increasing their spends. Still, until the Detroit firms breaks free of the $3k-per-vehicle level, it will be tough to heap too much praise on their restraint… and until the imports top $3k-per-vehicle, it won’t be much of a horse race.

#Incentives #Sales

Edward Niedermeyer

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Dimwit on Jan 04, 2011

A closer look might be required than just the average figures. It all comes out by model. $5k on a Flex but >$500 on F150's makes a large difference. Ford could keep that up indefinitely. It would be interesting to know how broad a range the incentives cover. Just a general interest rebate? Cash on the hood over the complete model range? Yadda, yadda, yadda.

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- CJinSD on Jan 04, 2011
  
  The average is determined by the total expenditure on incentives divided by the total number of vehicles sold, not the sum of the prices of each model line's incentives divided by the number of model lines. I remember when $500 cash back was a big deal, and the average transaction price has less than doubled since then. Ford may be able to keep up $3K a car incentives indefinitely, which is what a P/L statement will reveal. The problem is that incentives tend to erode brand equity.
  
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Steven02 on Jan 05, 2011

Do any of the incentive reports include price of the vehicle in their reports? The Detroit 3 sell more trucks. Trucks are more expensive and have bigger incentives. So do crossovers. Imports typically sell more cars, which are typically lower priced and have lower incentives (Camry best selling car again, has been for several years now). If the average price of a truck is 30k, and the average price of a car is 20k, (picking numbers randomly don't have actual data on it), then D3 having a 3k incentive is just as bad as a 2k incentive from the imports when it comes to incentives. I know the above example doesn't include the fact that all auto manufactures sell a mixed fleet of vehicles, but I really do think that incentives should be tracked as a function of MSRP as opposed to a price per unit.

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