Lexus Gets Aggressive on Auto Incentives While Overall Industry Spending Levels Off, Says

Lexus Gets Aggressive on Auto Incentives While Overall Industry Spending Levels Off, Says

Lexus Gets Aggressive on Auto Incentives While Overall Industry Spending Levels Off, Says

SANTA MONICA, Calif. — September 1, 2011 — BMW and Mercedes-Benz are each in position to knock Lexus from the top of the luxury sales standings this year, but Lexus isn't going down without a fight.

According to's monthly analysis of the True Cost of IncentivesSM (TCISM), Lexus upped its average incentive spending 41 percent to $2,667 per vehicle in August, the biggest month-to-month increase by any major automotive brand. The boost in spending was far more dramatic than BMW's, which ticked up just four percent to $3,664 per vehicle from July. Mercedes-Benz's incentive spending, meanwhile, fell nine percent to $3,808 per vehicle in August.

"Unlike many of its competitors who are starting to focus on 2012 model year vehicles, Lexus is getting more aggressive about selling its 2011 models in hopes of making up some lost ground," said Jessica Caldwell, senior analyst at "It might be a Hail Mary on their part, but if Lexus can make up even some ground in the next four months, it will give them a little momentum when the race starts all over again next year."

While Lexus makes its move, though, the top luxury brands are hardly resting. Mercedes, for example, is offering $4,000 cash incentives to conquest other luxury car owners for its M-Class and E-Class vehicles, which also happen to be in the same segments as Lexus' two strongest products: the RX and ES.

Through the end of July, BMW led the luxury sales race with over 135,000 units sold, out pacing both Mercedes-Benz (129,932) and Lexus (102,549). At the same point last year, Lexus had sold 126,000 vehicles, about 5,000 more than any the next highest luxury brand.

Across the industry overall, incentive spending saw little movement from July to August. Automakers spent an average of $2,316 on vehicle incentives in August, said, down less than three percent from July and down 14 percent from August 2010. The sales growth of 2012 model year vehicles, which typically command lower incentives, is believed to have offset any increased incentives on 2011 model year vehicles.

Average True Cost of IncentivesSM (TCISM), by Car Manufacturer
Manufacturer August 2011 July 2011 August 2010 Aug 2011 vs. Jul 2011 Aug 2011 vs. Jul 2010
Chrysler $2,829 $2,778 $3,270 1.8% -13.5%
Ford $2,619 $2,754 $3,100 -4.9% -15.5%
GM $2,994 $3,139 $3,820 -4.6% -21.6%
Honda $1,499 $1,624 $1,731 -7.7% -13.4%
Nissan $2,459 $2,442 $2,971 0.7% -17.2%
Toyota $2,189 $2,202 $2,193 -0.6% -0.2%
Industry $2,316 $2,384 $2,701 -2.9% -14.3%

Among the top six car manufacturers, only Chrysler and Nissan increased August incentives over July. Chrysler bumped up its incentive spend 1.8 percent, while Nissan increased its spending 0.7 percent. Honda had the biggest decrease in spending last month, dropping 7.7 percent from July to August.

On average, South Korean and European automakers both stepped back incentive spending last month almost 10 percent. South Korean automakers offered an estimated $1,025 per vehicle in August, while European brands offered an average of $2,018 per vehicle. U.S. brands spent $2,846 per vehicle last month (down 3.2%), while Japanese automakers spent $2,007 per vehicle (down 0.3%).'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, 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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