By on April 2, 2011

For March, TrueCar has included a chart diagramming the ratio of incentive spending to average transaction price, giving us a look at two key metrics on a single chart. Short of a complete fleet sales or a retail market share breakout falling into our laps (crazier things have happened), this is one of the more important metrics you’ll want to look at to qualify the raw volume numbers coming out of March. But it’s not the only one…

Once again, for pure incentives numbers, we’ll have to look at two sources: TrueCar (above) and Edmunds True Cost Of Incentives. And once again, there’s a discrepancy. GM takes the top honors from Edmunds, for piling an average of $3,202 on the hood of each car, and earned some sass from Edmunds’ Director of Industry Analysis, Jessica Caldwell, who says

The hefty – and costly – incentives from GM in the first two months of the year fell back to Earth in March, and that translated to lackluster retail sales. The industry will be carefully watching GM’s performance this month to see if March was an aberration or the start of a downward trend.

TrueCar, on the other hand, gives top “honors” to Chrysler, which pipped GM by less than one hundred dollars. But the most interesting dynamic among the Detroit automakers is the short-term trend, with Chrysler and Ford’s incentives headed upwards and GM headed downwards. With the entire industry away from incentives compared to year-ago numbers, and pricing likely to be bolstered by Tsunami-related production interruptions, if there were ever a time for Detroit to bust its traditional overreliance on incentives, this might just be it.

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18 Comments on “March Incentives And Transaction Prices...”

  • avatar
    Educator(of teachers)Dan

    I’m amazed how many of those numbers indicate less incentive spending, which for the overall industry is good news. 

  • avatar

    downward trend. GM has been losing ground to Ford for five years as their lead has steadily dwindled. Ford will win most months this year and take the annual crown. still the blindly faithful will postulate as they did when Toyota become number one in the world and more excuses from the Ren Cen are to be expected as slide continues…

    • 0 avatar
      doctor olds

      Great Info! Thanks Ed!
      The incentive % of transaction price changes the picture a bit and highlights GM’s industry leading price performance (pic 13 above) .

      @Buickman, you may be right about your prediction, but I would not bet on it!

      Ford has gained a lot of ground on GM in the last 5 year, but GM is still far ahead of Ford for the first 3 months of 2011 in the U.S.

      GM=592,546 to Ford=486,886 (Toyota=433,924)

      Ford is very unlikely to make up that 105,000 gap, and will more likely end the year at least 20% down from GM at the same time GM commands over 10% higher transaction prices!

      Globally, Ford is MUCH smaller. For the 2010 calendar year Ford fell to 5th place, 3.1 million(!) behind GM:
      • Toyota: 8.42 million
      • General Motors: 8.39 million
      • Volkswagen AG: 7.14 million
      • Hyundai Kia: 5.74 million
      • Ford Motor: 5.31 million

      The Japanese press had this to say: “General Motors is going strong, and it’s a sure sign of its re-emergence,” said Yasuaki Iwamoto, auto analyst with Okasan Securities Co. in Tokyo.

      2010 YE: GM total debt was $11.6B, $93.5B(!) less debt than Ford’s $104B. 
      GM already had $6.3B more cash on hand: GM = $26.6 vs Ford = $20.3B
      GM just raised $3.8B from the sale of its stake in Delphi, and $1B from the sale of Ally preferred shares giving them an extra $4.8B in cash to work on top of the cash they have generated from operations this year.

      It would not be wise to bet against GM. They are running away from Toyota globally, and by year end, General Motors will once again be the largest selling car maker in the world as well as the U.S.

    • 0 avatar

      Doc Olds, it’s easy when every taxpayer in the country is on the hook for GM’s finances. Don’t you even have a little shame for being such a fan when they cheated to get their advantage? Or is it ok because GM is so wonderful that they deserved to be given our money? I’m guessing that you are retired, do you not feel a little sense of shame that you were one of the ones who was there and was in some part responsible for driving GM into the dirt? You are just too much of a relentless cheerleader for GM, it grates a lot on the rest of us.

    • 0 avatar

      dear doctor olds,

      thanks for the insightful data. you are correct about the significant lead GM has at the end of quarter 1. the loyalty incentive drove sales higher at the start of 2011, too bad it wasn’t continued and something else dropped if lowered incentives was deemed desirable. still, making up 100,000 units by year end is no small feat indeed.

      you mention global sales and financial positions, which are somewhat skewed. counting complete unit sales from a partnership such as Wuling isn’t really fair and as to GM’s debt advantage…well, we all know that story.

      Ford will, in my opinion, overtake GM in the United States for a number of reasons beyond fresher products:

      image…look how upset people are at GE for not paying taxes and imagine how they feel about the $43 Billion loss carryforward at GM. don’t forget the tens of thousands still out there who got burned in the BK…the 20,000 Delphi retirees who lost pensions, other retirees paying more for health care etc…while executives receive bonuses. 

      dealers who were robbed of their livelihoods, the closed Saturn and Pontiac stores now selling Nissan and Kia. for example here in Michigan the was a beautiful Saturn store in Clarkston right alongside I75. it is now operating as Nissan. btw…how did Nissan do last month?

      hourly workers who have been forced into a second tier wage. how about the workers in Indianapolis? what do you think will happen to GM sales in that market when the stamping plant shutters? how do they feel in Columbus, Marion, Janesville, Fremont, Wilmington, Baltimore, Detroit, and even Flint? there is more negativity about GM than you may realize and it isn’t something you can put on a chart.

      what I like about Ford is their marketing, including ads focused on current product actually on the shelf. for example, why spend tens of millions on the Volt when the availability isn’t there? many dealers are now asking thousands over MSRP, portraying franchisees as greedy when in fact the factory created the situation. it’s a waste of money and results in bad imaging…again poor marketing.

      more than these factors though is the most troubling issue I see with GM. that is the insane incentive structure of stackable (or not) rebates, coupons, certificates, vouchers, private offers in addition to the myriad of rates and residuals which make figuring a car deal a most unpleasant experience. we are still overly focused on promoting the deal instead of the vehicle, the brand, and it’s desirability.

      so let me finish by stating that my prediction is based on more than numbers you can quantify and chart. it’s based on being in touch with the market and those in it. my ear is to the ground, I listen to people and hear what they are saying. that my friend is infinitely more valuable than statistics.

      enjoy your day and thanks again for the interesting and relevant information.


      • 0 avatar
        doctor olds

        @Buickman- Nissan, sales were up 22% DSR in March according to Wards, edging Chrysler in the first quarter by 39 units: Nissan=285,358 ; Chrysler=285,319

    • 0 avatar

      After reading all the comments to Buickman’s post I have to add that I’m not at all optimistic about Ford and GM making any kind of a major, sustained comeback from carmageddon without continued and sustained government support and endless preferential tax and accounting measures and exceptions.  I’m not saying this to be mean, but optimism, wishing and hoping for all the bad to go away defies what is happening in the real world. Neither Ford nor GM will ever be self-sustaining again, nor will they be profitable if they start to have to pay taxes, repay their debts, and contribute to their UAW obligations.  They are just barely breaking even now without having to satisfy those financial demands because the US government has cut them a lot of slack to spur the recovery.  The whole US auto industry landscape will be totally different in just three short years.  By 2015 the major shake-out will be complete and Ford and GM will be operating more akin to Fiatsler today.  In my opinion Ford will be wholly-owned by Toyota and GM will have been parceled off to various JVs in Communist China. Only time will tell if I’m right or wrong.  But I was right about the bankruptcies of GM and Chrysler, and that was in 2007, long before it actually happened.  No crystal ball, just able to read the financial tea leaves.  The sales, worldwide, for Ford and GM are just not there, unless they move to China, India, Brazil and Russia.

      • 0 avatar
        doctor olds

        @highdesertcat- You wrote: “Neither Ford nor GM will ever be self-sustaining again, nor will they be profitable if they start to have to pay taxes, repay their debts, and contribute to their UAW obligations.  They are just barely breaking even now without having to satisfy those financial demands because the US government has cut them a lot of slack to spur the recovery.”

        These are facts:

        GM & Ford are profitable
        Most importantly, far from “barely breaking even”, both Ford and GM made very good profit last year in a still depressed U.S. market. In Ford’s case, with NO government assistance.
        The direct measure of business operations’ success is EBITDA (Earnings before Interest, Taxes, Depreciation & Amortization).

        2010 EBITDA: Ford=$14.5B, GM=$12.4B
        2010 Net Income(after taxes, etc): Ford=$6.6B, GM=$4.7B

        As the economy recovers and inevitable new car market rebound occurs, the bottom line results will be much stronger yet. The car business is extremely volume sensitive due to the immense fixed costs that exist before the first vehicle is built.  Note that Toyota, at the time the most profitable car maker in the world, was pulled to its first annual global loss just due to the market collapse in the U.S. in just the last, 2 1/2 months following the Global Financial Crisis in mid October 2008. It was little noted, but Toyota went on to lose more than GM in the first quarter of ’09 for the same reason. They were fortunate to have deep pockets at the time compared to the U.S. makers, but still received Japanese government financial assistance.  

        The U.S. tax code allows any business to carryforward tax losses against future profits. This is not preferential at all to Ford, in particular. It may be unusual in the case of GM’s bankruptcy reorganization, though not unprecedented.

        They are already repaying debt and funding UAW obligations
        Both Ford & GM generated net profit, AFTER paying their bills. You may be confused, as many are, thinking that GM owes money to the treasury to repay “bailout” funds. That is factually inaccurate. ALL remaining recovery of the taxpayer’s investment will come from GM stock sales, not from company operations. Whitacre was not lying when he said all debt had been repaid. Like it or not, the U.S. took 62% ownership of the company in exchange for all additional bankruptcy funding.

        The 2007 UAW contract was a breakthrough, and changes the game, obsoleting your ideas about costs and obligations. I am not familiar with Ford’s number in detail, but they certainly have similar benefits on a bit smaller scale than the GM numbers that follow.
        Contract highlights for U.S. makers, GM numbers detailed:
        1- VEBA permanently eliminates the burden of funding UAW retiree health care saving $7B/year drain off GM’s bottom line.
        2- Jobs Bank elimination saves another $0.8B a year that was being spent to pay people who no longer had any work for decades.
        3- Tier 2 wages, contracting of janitorial and other services combine with the VEBA and Jobs Bank savings to bring total labor costs for GM to parity with the non-union foreign transplants.

        All of these contract changes are unrelated to government intervention and are the primary basis for Ford’s current business success. The UAW may have been late in coming to the table, but this is the new reality.

        These companies were marginally profitable with a 16+million U.S. market under their old cost structures. Today, they are very profitable with only 10.5million U.S. sales in 2010.

    • 0 avatar
      doctor olds

      @Buickman- You may be right and only time will tell. Wuling sales are fair to criticise, but GM’s total sales in China are far less than their 3,000,000 advantage over Ford. Ford, as every foreign maker, is only allowed a 50% share of the businesses selling in China. I only mention the current financial condition, as I think it shows they have the capability to compete very agressively on price. I make it obvious I want them to succeed. Believe me, I go to that Saturn store to check out the used cars quite often and it is certainly a heartbreaker. There is a beautiful Chevy store in Ortonville that sits vacant, too.

      @MikeAr- Most of you really do not understand the real dynamics of the car business, though many think they do. I am not one bit ashamed. Government had a tremendous role in bringing the company down, though the unions power global competition and management decisions are all in the mix.
      I know that GM invested $3B in America last year, and will invest as much or more again this year. GM employees, suppliers and their employees have certainly paid $billions that would have instead been hundreds of thousands more on unemployment had they been allowed to die.
      The notion that GM “cheated” to get their advantage is simply ignorant. The top leaders of GM lost virtually everything and it is ridiculous to think they chose that route. They ran out of money because car sales collapsed in late 2008. Darling Ford was not far behind and would have been forced into bankruptcy as well if they had not lined up $23B in credit before the financial collapse.
      Saving GM saved the whole domestic industry and is good for the United States, whether 100% of the taxpayer investment is returned or Treasury sells at today’s stock prices a we lose $9B. It would have cost America $100’s of Billions to just let them die.
      I am sorry that my cheerleading grates on you. Conversely many ignorant and ill informed comments grate on me, and I at least research facts before expressing opinions.
      And, like it or not, GM does remain the largest industrial manufacturing company in American history and will be the largest volume company in the world again in 2011.

  • avatar

    I’ll state the obvious: Hyundai is clearly whomping everybody else.

    • 0 avatar

      It makes some sense. Hyundai’s highest volume cars are no more than 2 years old. If you divide the Hyundai incentive of $1,308 by 6.9%, you get an average transaction price under $19,000. That means lots of compacts and subcompacts which should sell well with $4 gas. Average Honda transaction price was $6,000 higher, which probably means they sold a greater mix of their larger and less timely products. Not to mention that every volume Honda is old. I think the big winner was Toyota. They’ve faced the worst anti-Japanese propaganda campaign since pre-1946 and they’re still close to the lowest percentage for incentives.

  • avatar

    Have you seen the MSRP on a full-size truck with a V8?  It’s about 30K.  3K on the hood brings it down to the 27K range.  I doubt that will see much change in the full-size truck market.

  • avatar

    More, or less, incentive spending did not help my neighbor’s son when he lost his job at the Chrysler dealer sales dept.  Sales were just not there to keep him and two others employed.  The problem is Chrysler itself, its name recognition or its name avoidance. If you can’t move the iron, you discount it.  Sometimes, even if you discount it, things still don’t move as much as you want them to. Ford is doing extremely well in this area, not only in trucks but sedans and small SUVs as well.  GM is a toss-up. Try as they might, the Silverado is just not selling except to GM fans.  Ironically, the GM dealer here is also the Toyota dealer and that side of the house is going gang-busters.  There already is a shortage of Prius in this area, and none are forthcoming for a while.The trouble with incentives, as I see it, is that as long as the dealers can set their own price, the MSRP is useless and the buyer can either take it or leave it when the dealers pad their sell-price. Many dealers have to pad their sell price, even with incentives, in order to break even if their sales volume is below what they need to survive. In that case, buyers will often drive the  extra 100 miles to go to a volume dealership, like in El Paso or Albuquerque. One lady I know even went as far a Denver to get the exact Highlander she wanted at the Internet-price she wanted to pay. Point here is, incentives or not, most people will seek exactly what they want at the price they’re willing to pay.

    • 0 avatar
      Educator(of teachers)Dan

      That’s true.  I’ve started searching the NEW cars on Autotrader and eBay to see what it would cost and how far I would have to drive to find the exact model with the exact options I want.  For the right car I’m willing to go 500 miles to pick it up if the options/color combo/price is perfect. 

    • 0 avatar

      Dan, that is a very prudent strategy.  The local dealers want to sell whatever it is they have in stock on the lot, for the maximum price/profit they can. I don’t blame them for that.  In the case of my 2011 Tundra, the local dealer wanted to sell me a much more decked out Limited with 4 doors, of the previous year model, for more money.  IOW, too much truck for what I wanted and needed.  And so it is with most purchases off the lot.  There is always some compromise, incentivizing included, dealer padding notwithstanding, before the buyer decides to take that prized vehicle home. And most dealers, as we all know, are loathe to do any special ordering, or to look very hard for what you want in the dealer-universe. But if you look around on the internet and happen to run across something that is exactly what you are looking for, so much the better.  If you can also get it at the price you are willing to pay, that’s just icing on the cake. 500 miles to drive sounds reasonable but, some time ago,  one of my sons bought a full-pop Sequoia for his wife. He flew from San Diego to Chicago where the salesman picked him up at the airport.  Even so, he got what he wanted, when he wanted it, at the price he wanted to pay, and all told, it still cost him $1000 less than if he had special-ordered it from his dealer in Pacific Beach.  It pays to shop!

  • avatar

    Incentives as a percentage of transaction price are the most relevant metric.  Chrysler is on top of that ranking, but I was surprised to see Nissan at #2.  GM is still high but cut back from the 11+% in February.

  • avatar

    Love these charts. Yesterday I was wondering why Nissan had such a huge bump in March, today I see why.

  • avatar

    Thank you for the % as a function of transaction price charts.  Been dying for these.

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