Net pricing for new cars and trucks will likely decline about 0.5% in 2004, less than in recent years but still good news for US consumers, a General Motors Corp. executive reportedly said.
Paul Ballew, GM’s top sales and market analyst, told the Associated Press (AP) pricing remains one of the biggest challenges for automakers, who have poured on incentives at record levels this year to entice shoppers.
AP noted that high petrol prices did little to curtail demand in May, when sales were at their highest rate of the year, but observers are predicting business to be off significantly in June, partly a payback from last month’s blistering pace.
Automakers report June sales figures Thursday, and Ballew reportedly said GM results appear to be “a little softer” than anticipated.
Ballew told AP the good news for GM and other automakers in terms of pricing is the rate of decline so far this year has been less than the past couple. Two years ago, he said, net pricing was declining at about 1.5% to 2% on a year-over-year basis.
“Just about every sector of the economy faces negative pricing,” he reportedly said.
In a new research report cited by the Associated Press, Standard & Poor’s said the surge of sales in May was likely enough to reduce bloated Big Three inventories and alleviate “concerns of a possible sharp escalation in pricing pressures.”
Helping to offset the pricing woes for automakers has been a much richer mix of vehicle sales, particularly luxury brands and big trucks and sport utility vehicles, AP noted.
GM’s revamped Cadillac brand, for example, reported a 10.3% rise in business to the end of May while Honda’s Acura was up 20.2%, Lexus 18.3% and Infiniti 13.2%.
Analysts and industry executives reportedly say the rise in demand for premium and larger vehicles can be attributed to affordability and more choices than ever for consumers. It has helped boost the average vehicle transaction price from $20,876 in 1995 to $27,023 last year.
It is also why, along with intense cost cutting at most companies, industry revenue continues to grow, Ballew told the Associated Press.
“We’re not biotech,” he reportedly said. “This industry is not growing 20, 30, 40% a year. But the industry is growing. It’s a $1.3 trillion industry today. It’s going to be a $2 trillion industry by the end of the decade. It’s $450 billion in the US today. It’ll be $500 billion soon.”