Edmunds.com Reports: Despite Slow October Sales, Value Pricing Strategies Decrease Domestic Manufacturer Discounts

SANTA MONICA, Calif., Oct. 20, 2005 -- Edmunds.com, the premier online resource for automotive information, reported today that the average discount percentage for General Motors, Ford and Chrysler fell in September, compared to September 2004, indicating that the domestic manufacturers' value pricing strategies are starting to show positive signs.

The average discount percentage is the difference, expressed as a percentage, between the average manufacturer's suggested retail price (MSRP), and the net price, which is defined as the transaction price after all available incentives are taken into account. Comparing September 2005 to September 2004, Edmunds.com found that GM experienced the biggest drop in its discount rate, from 23.1 percent to 16.4 percent. Ford saw a decline from 21.4 percent to 17.4 percent, and Chrysler's discount percentage decreased from 19.4 percent to 17.5. The discount rates for the major Japanese manufacturers were virtually unchanged.

The average MSRP for GM declined from $31,819 in September 2004, to $30,309 in September 2005, while its average net price increased from $24,532 to $25,329. "Our analysis shows that GM's value pricing strategy, called Total Value Promise, has been effective in lowering average discount percentages for most of their 2006 model line, at least in the early stages of the new model year," remarked Jesse Toprak, executive director of industry analysis for Edmunds.com.

Ford's average MSRP fell from $32,245 to $30,752, while its net price saw only a minor decrease from $25,462 to $25,411. Chrysler's average MSRP decreased from $29,629 to $29,201 while its net price increased from $23,924 to $24,089.

General Motor's average days-to-turn, which measures the average number of days it takes a dealer to sell a new vehicle after it arrives at the lot, also declined dramatically compared to the same period last year, down from 97 days to 65 days. Ford's days-to-turn was down to 90 days in September 2005 compared to 101 days in September 2004, and Chrysler's days-to-turn was down to 84 days from 90 days. "The dramatic declines in days-to-turn, particularly for General Motors, are the result of the success of this summer's employee discount programs and the higher market share of the new model year vehicles," Toprak said.

On the other hand, selling rates so far in October have been less than stellar for the domestic manufacturers. Transaction data from Edmunds.com shows sales of new cars and trucks for the first 15 days in October are down, compared to the same time period last year, 19 percent for General Motors, 24 percent for Ford, and nine percent for Chrysler. Total industry unit sales decreased approximately nine percent. "As expected, the pull-ahead effect of the summer employee pricing promotions has been hitting dealership traffic hard in October," Toprak added. "Although net prices are up and incentives are down for the domestic manufacturers, they are likely to increase their incentives spending -- and endure increased net prices -- in response to weaker consumer demand in the coming months."