Latest Reports of Automotive 'Price War' Don't Even Amount to a Skirmish, Reports Edmunds' AutoObserver.com
SANTA MONICA, Calif. — February 16, 2011 — Recent proclamations that a "price war" is brewing between automakers appear to be premature, according to an analysis of incentives trends published on Edmunds' AutoObserver.com.
In "Back to the Barracks on Incentives," AutoObserver's Dale Buss reports that General Motors paid $3,733 in True Cost of IncentivesSM (TCISM), on average, for each 2011 model year vehicle sold in January — a 22 percent increase over its TCIsm average in December 2010. The automaker's incentive boost was a major departure from typical January car deals and no other major automaker came within even half of GM's incentives increase.
"It takes at least two sides to battle, and besides a reluctant Toyota, no other major automaker has joined GM's unseasonably proactive incentivizing," said Buss. "With a recovery gradually building in the U.S. market, most car companies don't see a need to deliver more incentives."
According to analysis by Edmunds.com, GM's feisty incentives spending paved the way for the first overall December-to-January TCISM increase in the auto industry in at least the last ten years. Historically, January sales are the lowest of any month in the U.S. market, and automakers typically use the month as a breather between feverish Christmas-holiday promotions and the spring selling season that often begins with Presidents' Day initiatives in February.
Edmunds.com analysts speculate that GM's aggressive incentives spending is more of a short-term play to increase market share than an attempt to drive a "price war" with competitors.
"GM's increase in incentives could be an attempt to draw out what industry observers have predicted for a while now: a period of pent-up demand accumulated during the recession that should result in a better sellers' market," said Edmunds.com's Chief Economist Lacey Plache. "They may be thinking that consumer spirits are up now, and there are signs of credit loosening, so they're seeing if they can pull some people out of the woodwork who may be ripe for buying."
Edmunds' AutoObserver.com, however, doesn't anticipate that GM's incentives play will bait competitors into similar behavior.
"Most big players in the American market," writes Buss, "aren't likely to abandon their hard-won discipline of tighter inventories, firmer pricing and more attention to brand-building in order to chase expensive and probably ephemeral upticks in market share with expensive incentives."
Read Edmunds' AutoObserver.com's full analysis of General Motors' pricing strategy at http://www.autoobserver.com/2011/02/back-to-the-barracks-on-incentives.html.
About Edmunds.com, Inc. (http://www.edmunds.com/help/about/index.html)
Edmunds.com Inc. publishes Web sites that empower, engage and educate automotive consumers, enthusiasts and insiders. Edmunds.com, the premier online resource for automotive information, launched in 1995 as the first automotive information Web site and hosts the most established automotive community online. Its mobile site, accessible from any smartphone at www.edmunds.com, makes car pricing and other research tools available for car shoppers at dealerships and otherwise on the go. InsideLine.com is the most-read automotive enthusiast Web site. Its mobile site, accessible from any smartphone at www.insideline.com, features the wireless Web's highest quality car photos and videos. AutoObserver.com provides insightful automotive industry commentary and analysis. Edmunds.com Inc. is headquartered in Santa Monica, California, and maintains a satellite office in suburban Detroit. Follow Edmunds.com on Twitter@edmunds and fan Edmunds.com on Facebook at http://www.facebook.com/edmunds.