Autofacts Analysis Shows Record Cash Incentives Indicate That a New Vehicle 'Price War' Has Begun
10 July 1997
Autofacts Analysis Shows Record Cash Incentives Indicate That a New Vehicle 'Price War' Has Begun
DETROIT, July 10 -- Cash incentives on cars and light trucks
reached record levels in June, up 30 percent over the same period last year,
according to the Autofacts Group, a division of Coopers & Lybrand Consulting.
This follows an average 26 percent rise in May according to Autofacts.
"The implication of these levels of incentives is that the real cost of
new vehicles is being lowered permanently. A price war is under way," said
Suzanne Kinsler, managing associate at Autofacts.
Kinsler suggests that recent pricing announcements by Nissan, Toyota and
Honda, and GM further indicate a price war for 1998 is in the making. "Past
price realignment successes, combined with price pressures at the low end of
the new vehicle market from softening used vehicle prices, should prompt more
auto companies to cut real prices, particularly in the price-sensitive small
car segment," said Kinsler. "In reality, these price reductions will just
formally incorporate the cash discounts that have been available throughout
1997," she said.
Overall, average incentives on all makes in June were the second highest
peak for any month recorded in the 1990s. Autofacts tracks all new vehicle
incentives, cash and financing/leases offered to dealerships or directly to
customers nationally and regionally.
Domestic brands (Chrysler, Ford and General Motors) pumped up cash
programs an average 40 percent from record low spending levels in 1996.
"However, domestics continued to be outspent by the Asians, by more than
25 percent on average. Asian cash deals were up 16 percent in June from
already aggressive programs in 1996," said Kinsler.
Europeans were the only group in June to report lower incentive spending
than in 1996, down by 30 percent year over year. European makers have been
rationalizing models and lowering prices of their new vehicles in recent
years.
Another record high for the Autofacts' series is the way incentives are
being tailored for specific areas of the country. Regional programs accounted
for 55 percent of the average incentive dollar spent in June.
"Consumers are seeing bargains across the spectrum, on both cars and
trucks in all size segments and at all price points. However, lease deals
will be less lucrative than in previous years, a reflection of concerns about
used car residual values," Kinsler said.
The Autofacts Group is a leading global automotive forecasting and
planning company. It provides automotive databases and reports, forecasts,
competitive analyses, strategic planning, market research, and systems and
management consulting. Regional coverage includes North America, South
America, Western Europe, Eastern Europe and Asia-Pacific.
One of the world's leading professional service firms, Coopers & Lybrand
L.L.P. provides globally integrated services for enterprises in a wide range
of industries. The firm offers its clients the expertise of more than 16,000
professionals and staff in offices in 100 U.S. cities, and through the member
firms of Coopers & Lybrand International, more than 74,000 people in 142
countries.
SOURCE Coopers & Lybrand
