USA: Chrysler president sees incentives' importance reducing as new models arrive
Profit-draining retailed incentives, which seriously hurt Chrysler's turnaround last year, may be easing up a bit in 2004, the company's chief executive Dieter Zetsche said in a keynote address to the National Automobile Dealers Association annual convention on Saturday.
According to Reuters, Zetsche said incentives, which industry pundits have likened to drug addiction, are unlikely to disappear from the fiercely competitive US motor industry.
But he added that favourable economic conditions and an unprecedented number of new car and light truck model launches should reduce the need for generous cash rebates and low-interest loan deals to draw customers onto dealer forecourts.
"With so much new product coming to your showrooms over the next few years, the time may have finally come for us to put less emphasis on selling 'the deal' and more emphasis on selling the product," Zetsche reportedly told a packed audience of dealers.
"Although average incentive levels remain high ... they may have begun to ease a little this year. New and exciting product is also what you might call a natural remedy for high incentives," he added.
"So 2004 just may be the welcome year that the incentive war, in which residual values and margins have been big casualties, begins to wind down and the product war begins in earnest."
Reuters noted that Zetsche was referring to what Jim Press, chief operating officer of Toyota's US subsidiary, described on Friday as "a thermonuclear product war" - analyst expectations that more than 80% of the motor industry's US volume will be replaced with new product over the next 36 months.
For Chrysler, Reuters noted, that means nine new vehicles this year [Chrysler 300C, Dodge Mangnum and Chrysler PT Cruiser convertible for starters] and 25 over three years.
"That's a torrid pace for new vehicle launches," Zetsche reportedly said in his speech, as he hailed the "virtual tidal wave of new product" set to descend on showrooms across the United States.