German newspaper Handelsblatt reports that discounting in the depressed German market is already at record levels and shows no sign of abating. The report draws attention to generous price cuts and highly favourable finance deals, but notes that this activity has failed to stimulate demand.
“Seldom in the past has it ever become this aggressive,” Albrecht Denninghof, automobiles analyst at HypoVereinsbank told Handelsblatt.
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The newspaper report says that the foreign carmakers – notably Fiat, Renault and Nissan – have led the way on discounts.
Handelsblatt says that in Germany, Fiat is already offering a no-deposit financing and leasing deal on the Stilo, its recently introduced medium-class model. Nissan is offering interest free finance. Volkswagen however, is trying to avoid price cutting by offering extras – like air conditioning – at no charge. But analysts note that that will still result in earnings erosion.
Philipp Rosengarten, analyst at DRI-WEFA, told just-auto: “The Big Three mass producers in Germany – Ford, GM and VW – simply cannot afford a price war there. Ford and GM have to be profitable in Germany due to pressures from their US parents. Volkswagen, of course, has its shareholders to consider.
“We also believe that the ending of block exemption in October will not significantly change the pricing landscape in Germany for the same reasons.
“As far as total market volume is concerned, we expect the new car market in Germany to decline by around 2% in 2002.”
