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Sweetening Incentives

3058 Views 1 Reply 2 Participants Last post by  ted
The big three are deep into an over production binge. Currently their dealer networks are individually sitting on triple digit days supply of inventory....

GM: 114 Days
Ford: 107 Days
Chrysler: 105 Days

Industry Average: 89 Days

They book profit on vehicles shipped to dealers, not on sales. So slowing down production would hurt Q1 earnings meaning they will continue to pump and dump. All three will attempt to sell their way out of this overhang by sweetening incentives. Consider over production by the big three has been fueling recent ramps of manufacturing indices.

GM and other car makers figure "it is cheaper to offer these incentives than to shut the plants. The problem is once you turn it on, [discounting] it is hard to turn it off, and now we are looking at another challenging month with February."

But there are signs that the pain threshold has been crossed in some models.


After four years of rapid growth, the U.S. new-car sales pace "appears to have stalled," Morgan Stanley analyst Adam Jonas said in a research note earlier this week. "We really think the best of the U.S. auto replacement cycle is over. The incremental buyer is moving from someone who needs to replace their car to one who just wants to."
"With inventory levels reaching a point not seen since August 2009 and extreme weather not letting up, we fully expect a short term rise in incentives," said Eric Lyman, an ALG vice president in Santa Barbara, Calif. "The danger is that this turns into an escalating arms race for market share," Mr. Lyman said.
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Better take advantage of these while they are here. Try to get some chopped off the MSRP and go for the incentives!
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