US Auto Incentives War Intensifies With Rebates Rev-Up

06 August 2003

The incentives war raging between America’s big three car makers is more intense than ever, judging by new data.

General Motors, Ford Motor Company and Chrysler Group again increased the rebates and loan deals on their models last month, taking the value of the average discount to around $4,000 a vehicle (€3,530; £2,485).

GM continues to offer the biggest incentives, its average deal equating to $4,253 last month – 8% more than in June and a 37% surge on July 2002. Chrysler averaged $3,846, up 3.8% from the previous month, while Ford rose 5.8% to $3,687.

However, the deals do not seem to have the desired effect, the figures reported yesterday showing the big three’s market share falling from 61.6% in July 2002 to under 60% last month [WAMN: 05-Aug-03]. Each percentage point represents around 165,000 vehicles and over $3 billion in revenue.

Most of Detroit’s lost share has been grabbed by Asian carmakers, whose rebates – though increasing – are tiny in comparison. Nissan offers an average discount of $1,492 a vehicle, up 6% from June; Toyota’s deals rose 15% to $1,132; and Honda surged 44%, but only to an $805 average.

According to Goldman Sachs analyst Gary Lapidus, this is a shift the US carmakers will do anything to stop. “July’s booming sales and declining inventory,” he said, “are further evidence that the big three (and their shareholders) will pay any price and bear any burden to maintain production in the face of rising supply from foreign-brand competitors.”

Data sourced from: USA Today; additional content by WARC staff