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Automakers heat up summer incentives

Alisa Roth Jul 3, 2007

Automakers heat up summer incentives

Alisa Roth Jul 3, 2007


Tess Vigeland: June was a great month to buy a car. The Big Three U.S. manufacturers spent more than $2.5 billion trying to lure you in with rebates and zero-interest financing.

That’s according to Edmunds.com. But, you didn’t bite. Sales fell at both Ford and Chrysler, and GM posted a 24 percent drop.

But Nissan sales revved up 24 percent. Toyota and Honda spiked, too. And they may be thanking what’s an unusual source for them — rebates and zero-interest financing. Alisa Roth tells us more.

Alisa Roth: U.S. carmakers are spending less on incentives than they have in previous years. They still have to offer them, though.

Jesse Toprak: If the vehicle is not selling itself in the marketplace, you have to give consumers another reason why they should consider them.

Jesse Toprak directs industry analysis for Edmunds.com. He says the Big Three still count on incentives, like zero-percent financing or cash rebates to sell cars. Toprak says incentives do work.

Toprak: Fundamentally there’s nothing wrong with it, as long as it’s done in an incremental basis — it’s done on a controlled basis for a limited period of time.

But U.S. automakers have been using major incentives for years and consumers have gotten used to them. Now many won’t buy a car unless they’re offered a sweet deal.

Incentives do help clear out inventory quickly. But too many, and they can put a big dent in the manufacturer’s bottom line. That’s been a major problem for the Big Three.

Japanese carmakers, on the other hand, use the enticements more judiciously. When a particular model’s not selling well, for example. It’s an approach the Big Three are starting to imitate.

Alan Baum is a consultant for The Planning Edge.

Alan Baum: Well, the design of course is to be much more targeted, and the timing is such that they’re trying to do that by making them have a fairly short shelf-life.

Still, says analyst Toprak, Japanese carmakers are spending more on incentives than they used to. And, he says, it looks like Detroit’s revving up for yet another discount race this summer.

In New York, I’m Alisa Roth for Marketplace.

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