Japan is ramping up production in the wake of the 9.0 March 11 earthquake, and major factory-to-dealer rewards are on the way from Toyota and Nissan to move the expected inventory wave. Automotive News states that the Japanese automakers will offer cash, interest rate holidays and significant lease incentives in the United States market. Sagging May sales numbers have made the incentive push a priority.
Supply is back meaning vehicles must move
Before May is over, Toyota and Nissan both expect to be producing normally again by the end of May, meaning vehicles need to sell. Incentive spending is the mechanism through which an overstock will theoretically be avoided. There will have to be even more automobiles sold since Nissan believes its Japanese factories will be up and running normally again by June.
The plan is something Nissan Division Manager Al Castignetti believes will work. He thinks that there will be tent sales by Memorial Day on Altima and Maxima automobiles which will have good deals.
Sales fallen in May
Compared with May sales in 2010, Toyota and Honda sales have fallen on hard times this May. Toyota sales have dropped by 56 percent (Lexus by 45 percent). Honda sales are down 41 percent overall, with the Acura division showing a 46 percent drop-off. Both Nissan and Infiniti aren’t doing too badly with only a 12 percent drop. A 37 percent increase in Hyundai Motors sales was shown in May as one of the only Asian automakers to do so.
The high gas costs, Japan earthquake shortages and low rebates are all attributed to the low Japan May sales according to J.D. Power and Associates forecaster Jeff Schuster.
Change from Feb. to Mar. in rewards
According to Edmunds.com, the decline in dealer incentives has been occurring for a few months, even in the U.S. From February 2011 to March 2011, there was a decrease in the average manufacturer incentive $220, or 8.6 percent, from $2,346 per new vehicle sold.
That was a huge drop in rewards. Ivan Drury as an Edmunds analysis spoke about this.
“These latest numbers show by far the biggest February-to-March incentives decline since Edmunds.com started tracking in 2002,” Drury said. “The decline is mostly likely a result of a 26 percent month-over-month sales jump in subcompact and compact cars which typically have a much lower level of incentives compared to large trucks and SUVs.”
The automakers may have changed from incentives
Whether or not GM, Ford Motors and Chrysler, also known as Detroit’s Big Three, stand idle or produce as many automobiles as possible, the fixed production and labor costs are the same. This was suggested by a team of researchers in a report called “The Effect of Customer Rebates and Retailer incentives on Manufacturer Profitability and Sales” that did a statistical analysis. There was overstock and more incentives since the Big Three produced more than they needed to. These rewards pumped up sales, often at a loss.
Articles cited
Auto News
autonews.com/apps/pbcs.dll/article?AID=/20110512/RETAIL01/110519951/1422
The Effect of Customer Rebates and Retailer Incentives on Manufacturer Profitability and Sales
isye.gatech.edu/|jswann/teaching/6230/6230 Swann Rebate (L13).pdf
Dealer Magazine
dealer-magazine.com/home/single-article/edmundscom-reports-true-cost-of-incentives-down-16/c11329d180.html
Pre-owned dealer incentives at Star Nissan
youtube.com/watch?v=2XJ9UW1VM24
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