Industry Tamps Down Incentives in September

By Bill Visnic September 30, 2010

As tightening inventories becomes a new business practice for automakers and many dealer lots have noticeably more elbow room, spending on incentives also is contracting: data from Edmunds.com indicates the overall average industry Total Cost of Incentives (TCI) for September was $2,576 per vehicle, down 6.2 percent from the same period last year.

Dealer lot - nearly empty.JPGSeptember incentive spending also was down by 4.6 percent - about $125 - from August, when the industry average TCI per vehicle was $2,701.

Moreover, September incentives for 2010 models decreased from August, bucking the industry's history to typically increase incentives in September as automakers attempt to sell off current model-year vehicles. This almost certainly indicates, said Edmunds.com industry analyst Ivan Drury, that remaining inventory for current model-year vehicles is far less than in years past.

For the domestic automakers, September incentive spending was down drastically at General Motors Co. and the Chrysler Group LLC compared with last September; the TCI figure for Ford increased slightly compared with September, 2009.

September TCI.jpg*Denotes record. Source: Edmunds.com

Honda, Nissan and Toyota all increased incentive spending compared with last September, with Honda's TCI of $1,755 per vehicle nearly doubling last year's figure.

Among vehicle segments, premium sport cars had the highest average incentives, $6,472 per vehicle sold, followed by premium luxury cars at $4,265.

Subcompact cars had the lowest average incentives per vehicle sold, $1,122, followed by sport cars at $1,423.

Analysis of incentives expenditures as a percentage of average sticker price for each segment shows large cars averaged the highest, 11.9 percent, followed by large trucks at 11.5 percent of sticker price. Sport cars averaged the lowest with 3.8 percent and premium luxury cars followed with 4.6 percent of sticker price. 

Comparing September incentive spending for all brands, Daimler AG's smart spent the least, $211, followed by Subaru at $548 per vehicle sold.

At the other end of the spectrum, Hummer spent the most, $5,055, followed by Saab at 4,997 per vehicle sold. Relative to their vehicle prices, Saab and Chrysler spent the most, 12.9 percent and 12.5 percent of sticker price, respectively; while smart spent 1.3 and Audi spent 1.8 percent.

Edmunds.com's monthly True Cost of IncentivesSM (TCISM) report takes into account all automakers' various U.S. incentives programs, including subvented interest rates and lease programs, as well as cash rebates to consumers and dealers.

To ensure the greatest possible accuracy, Edmunds.com bases its calculations on sales volume, including the mix of vehicle makes and models for each month, as well as on the proportion of vehicles for which each type of incentive was used.

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