Clobbered by an October US market share that approached 10-year lows, DaimlerChrysler’s Chrysler division will make its incentives more competitive with General Motors’, company executives told Reuters.
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But, Reuters said, Chrysler still views the US car industry’s price war as economically irresponsible and executives said they would still try to offer less costly deals than those from GM and Ford.
Last month “the gap between the incentive level of GM and Ford and us became huge,” Chrysler president Dieter Zetsche told Reuters in an interview. “Obviously there are some levels of a gap where it’s getting tough for us to stay successful.”
According to Reuters, Chrysler’s 31% decline in October sales compared with a year ago gave it a US market share of 11.5%, 1.7% below its figure for the year to date. While GM and Ford also suffered close to a 30% fall in sales compared with a record-setting month a year ago, their market shares were much healthier, with GM actually running ahead of its share for the year, Reuters added.
Reuters said that GM has pursued a strategy over the last year of gaining market share through incentives such as interest-free loans, an array of cash rebates and its current “triple-zero” program of no down payment, no interest and no payments for three months.
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By GlobalDataThe plans have cost GM billions of dollars, but have also helped the car maker boost sales and profits, Reuters said.
According to Reuters, while Ford has grown more aggressive with its incentives in recent months, Chrysler has been more reluctant, saying such deals cause too much damage to profits and train consumers to buy on price alone.
But with growing signs of weakness among American consumers, some analysts wonder how Chrysler and Ford can avoid throwing more money at buyers, Reuters said.
Chrysler’s executive vice president of sales and marketing Jim Schroer told Reuters in an interview that Chrysler had let too large of a gap open up between GM’s incentives and its own in October. He said GM’s deals had given it a larger market share, but not helped its overall volume, and that GM’s revised deals announced last week were less generous.
“While we had a share number for October that’s totally unacceptable, we’re getting to a range now where assuming there’s not an escalation from them, we should be able to show a more respectable performance in the month of November,” Schroer told Reuters.
According to Reuters, Schroer also said while incentives had played a role in boosting industry sales for much of the past year, a larger boost had come from home mortgage refinancing, which allowed thousands of consumers to free up money for new vehicles.
He added that refinancing began to slow in September, and that car makers would have to adjust accordingly, Reuters noted.
“We would love to see the level of incentives modified to a level that had some degree of economic sense to the bottom line of the company. Just buying market share to say you’ve got a share number is not economically rationale and in the interest of our shareholders,” Schroer told Reuters.
