Auto Incentive Spending Rises in February, but Doesn't Boost Sales

DETROIT March 3, 2005; Dee-Ann Durbin writinfg for the AP reported that U.S. and Asian automakers both raised incentives by about 10 percent in February from the month before, spending that had mixed results among the major companies. More deals are on the way.

General Motors Corp. and Ford Motor Co., the nation's two biggest carmakers, posted sales declines in February, while Asian brands such as Toyota Motor Corp. and Nissan Motor Co. both reported impressive gains.

The average industrywide incentive was $2,777 per vehicle last month, an increase of 9.4 percent, or $238, over January, according to Autodata Corp. That was more than double the usual increase for this time of year, Credit Suisse First Boston analyst Chris Ceraso wrote Thursday in a research report.

And the spending continues. Ford said Thursday it was raising cash rebates and extending zero-percent financing on some of its 2005 pickups and sport utility vehicles, including the Ford Explorer and F-150. Most of the rebates are increasing by $500, but rebates for the Expedition SUV, which saw a 13.8 percent decline in sales last month, are increasing by $1,000 to $3,000. The rebates will run through April 4, Ford spokesman David Reuter said.

Ford took the most aggressive action of the Big Three in February, raising the average incentive per vehicle by $432, or 15.4 percent, to $3,229, Autodata said.

GM had the highest average incentive of any automaker at $3,814 per vehicle, up 8.6 percent from January. GM slashed prices on mid-size SUVs in mid-February, an unusual move in the middle of a model year.

DaimlerChrysler AG's Chrysler Group, flush with the success of its Chrysler 300 sedan, had the Big Three's lowest average incentive on cars at $2,310 in February. But the company had the highest incentives of any automaker on trucks, at $4,186.

Asian automakers continued to have lower incentives than the Big Three, though they increased those deals by similar percentages between January and February. Combined, Toyota, Nissan and Honda Motor Co. raised incentives by an average of $141 per vehicle, or 10 percent, to $1,554. Toyota and Nissan both posted double-digit sales increases, but Honda's demand was off 7.2 percent.

European manufacturers raised incentives by just $8 per vehicle and saw sales fall by 2.6 percent.

GM announced a 12.7 percent drop in February sales this week, while Ford sales were off 3 percent. Both companies announced they would cut production in the first and second quarters of this year.