The Big Three US automakers are poised to unleash another barrage of buyer incentives in the wake of an unexpectedly sharp build-up in their inventories, according to a Financial Times (FT) report.
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
General Motors, Ford and DaimlerChrysler ended last month with the highest combined inventories for October in more than a decade. GM’s market share in the US slumped to 25.4%, from 31.4% at the end of September, lifting its stock of unsold vehicles to 95 days’ supply, from 61 days a month earlier. In the case of some models, including GM minivans, the Chevrolet Suburban sport utility vehicle and the Saturn LS sedan, inventories stand at more than four months’ supply.
The FT noted that GM said late last month it would temporarily shut five US plants in early 2005, mainly to trim supplies of SUVs and pickup trucks.
Still, Ronald Tadross, analyst at Banc of America Securities, told the newspaper that with production approaching break-even levels, “it won’t be too long before GM opts for lower pricing. Ford and Chrysler would have to follow.”
On Wednesday, General Motors launched a new, short-term incentive programme offering those who buy 2005-model vehicles using loans from its financing arm – by November 30 – the same interest rate on their next vehicle.
The General Motors Acceptance Corp.’s “Lock `n’ Roll” loan programme offers interest-free loans for up to three years: 2.9% for up to four years and 3.9% for up to five years.
John Casesa, analyst at Merrill Lynch told the Financial Times: “We expect escalation in the incentives war, likely in December.”
He reportedly estimated the North American industry had about 446,000 cars and trucks on hand beyond normal requirements. Ford’s inventories grew to 89 days’ supply at the end of October, from 74 a month earlier. DaimlerChrysler’s market share improved in October, but its stocks rose from 69 to 93 days’ supply.
If Ford’s market share of 18.4% in the first 10 months of the year remains the same in November and December, it will be at its lowest level for a full year since 1928, the FT added.
The paper noted that, besides unsold 2004 vehicles, the three companies are rolling out a flood of new models this autumn to stimulate buyer interest.
The FT said the bulky Chrysler 300 sedan has so far been the star performer (on a visit to Florida last month just-auto saw a large number of the new sedans on the roads, along with many of the more recently launched Dodge Magnum wagon).
GM led an unprecedented surge in incentives in September, the FT noted, including 0% financing for up to six years on some models. Advertising campaigns have also mushroomed.
Citing Autodata, a market research group, the newspaper said GM offered an average incentive of $US4,051 per vehicle in October, compared with $698 for Honda and $624 for Toyota. Ford and DaimlerChrysler each gave away about $3,500 per vehicle.
On Thursday, online information provider Edmunds.com said the average manufacturer incentive per vehicle sold in the United States during October was $US2,655, up $134, or 5.3%, from October 2003, and down $491, or 15.6%, from September 2004.
However, combined incentives spending for domestic Chrysler, Ford and General Motors brands was $3,663 per unit in October, down $616 from September 2004, Edmunds said. Chrysler lowered incentives spending in October by $133 to $3,644 per vehicle and gained 1.0% market share, achieving 12.8% in total. Ford decreased incentives spending by $637 to $3,410 per vehicle, and gained 0.3% market share, achieving 18.4%. GM had the most dramatic drop in incentives spending in October, down by $735 to $3,858 per vehicle. GM experienced a steep 6.0% decrease of its US market share, falling to 25.3%, which is its lowest point since September 2002.
As a result of GM’s decrease, total US market share for domestic brands fell to 56.5%, the lowest in recorded history, Edmunds added.
The Financial Times said Asian and other foreign carmakers are gaining market share and their inventories are far lower than their Detroit-based rivals.
BMW’s inventories totalled only 27 days’ supply at the end of October, with Toyota at 40 days and Honda at 46 days, the paper added.
