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 BegunDETROIT, 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