Sales incentives are like crack cocaine for the Detroit Three. Every year it’s the same story — as autumn nears Ford, GM, and Chrysler are strung-out from a summer of binging on incentives — or paying customers to drive cars off the lot.
The story goes like this — the Detroit Three have too much capacity so they build too many vehicles, especially the gas guzzlers nobody wants. So by the summer they have to offer crazy incentives to get cars off the lot to make room for next year’s models that no one will want either. By the end of the summer the Big Three are haggard and dopey from three months of losing cash in the interest of saving market share and clearing bloated inventories. GM, Ford, and Chrysler are forced to chase the incentives dragon, or be clobbered in a price war.
Meanwhile foreign rivals — primarily Japanese ones — stick to their guns on pricing, for the most part, and slowly but relentlessly chip away at the Detroit Three’s market share.
According to Automotive News, 2007 will likely be the tipping point where foreign players collectively have a 50% or better share of the US car market.
Toyota has had a knife in the back of the Detroit Three for years, but this summer it is twisting the blade by getting in on the incentives game in an ingenious and merciless way. With a new Tundra factory in San Antonio, Toyota is raising incentives on Tundras in hopes of capturing more truck market share. GM was trying to wean itself off incentives. GM’s average 2007 incentive is down a few hundred dollars compared to 2006, so Toyota is raising Tundra incentives to kick GM while it’s down.
So there’s never been a better time to hit the dealer lots and snatch up a great deal, at least until next summer, anyway.
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