No Shortage of Auto Incentives in 2006
Think Lee Iacocca and a light bulb goes off among automakers. He was the Chrysler exec who introduced the idea of giving away check to consumers that could be applied to the purchase of a car. Showrooms have never been the same since that 1970s watershed.
Since then, car buyers have come to expect incentives as a part of any purchase deal, and analysts believe this year automakers will continue to deliver.
According to NADAguides.com, a vehicle valuation Web site, “new car incentives and rebates will still have a large influence on car buyers this year as manufactures fight for their piece of the pie.”
The competition is expected to heat up as struggling U.S. automakers General Motors and Ford look to regain their footing. Toyota, the world’s second biggest automaker, is showing solid growth that could put it ahead of GM as the world’s No. 1 automaker. Last year, GM posted its largest annual loss, $8.6 billion, in more than a decade. Ford reported a $2 billion profit for 2005, but that was off 42% from the previous year. Ford has said it plans to cut 30,000 jobs and close 14 facilities by 2012.
Incentives, rebates and innovative marketing programs will be the tool used to drive customers to showrooms in 2006, Costa Mesa, CA-based NADAguides.com said.
“I think we’re going to see Ford and GM looking to stop the slide of their market share, and even Japanese manufacturers will start to get in on rebate programs,” said Mark Perleberg, lead auto expert at NADAguides.com.
Experts believe that even Toyota and Honda— have avoided relying heavily on incentives to move cars off of lots in the past— be playing in the space sooner than later.
Last year GM rolled out is employee discount program and Ford ran its Friends and Neighbors discount program. Both drew plenty of customers but cut into profits. Still, automakers know that rebates are too much a part of what customers have come to expect and may find it difficult to retreat.
Santa Monica, CA-based Edmunds.com, an online resource for the automotive industry, reported that the average automotive incentive grew 0.6% from January 2005 to January 2006 at $2,438. The industry’s total incentive spending is estimated to have reached $2.6 billion in January. Chrysler, Ford and GM spent $1.84 billion, or 71% of the total; Japanese manufacturers spent $489 million, or 19%; European manufacturers spent $186 million, or 7%; and Korean manufacturers spent $93 million, or 4%.
The bottom line is that consumers should buy what they really want, Perleberg said. “[But] a rebate maybe the hot button that pushes [customers] to choose one car over the other,” he added.
