Japan is ramping up production in the wake of the 9.0 March 11 earthquake, and major factory-to-dealer incentives are on the way from Toyota and Nissan to move the anticipated inventory wave. Automotive News reports the Japanese automakers will offer cash, interest rate holidays and significant lease rewards in the U.S. industry. Decreased sales in early May – particularly when in contrast to those from a year ago – prompted the automakers to consider diving back to the incentives pool.
Supply is back meaning vehicles must move
Both Toyota and Nissan expect to return to full production capacity in North The United States before May is over, which means there will be inventory to move. Usually, incentive spending is used. This makes it easier to keep away from overstock. There will have to be even more automobiles sold since Nissan believes its Japanese factories can be up and running normally again by June.
The plan is something Nissan Division Manager Al Castignetti believes will work. The best deals possible could be offered in the tent sales he sees happening. These sales will be on the Altima and Maxima cars.
Compared to a year ago, sales are hurting
Compared with May sales last year, Toyota and Honda sales have fallen on hard times this May. A 56 percent drop in Toyota sales has been seen. The Lexus had a 45 percent drop. A 41 percent decrease in Honda sales was shown. There was a 46 percent decrease in the Acura division. Nissan and Infiniti are only down 12 percent. Of all the Asian automakers, Hyundai was one of the only that had a rise in May number. It was up 37 percent total.
J.D. Power and Associates forecaster Jeff Schuster blames Japan’s May sales slumps on a combination of higher gas prices, lower rebates and shortages caused by the Japanese earthquake.
Change from February to March in incentives
According to Edmunds, the decline in dealer rewards has been happening for a few months, even in the U.S. An average incentive of $2,346 per new vehicle sold was shown in the United States in Feb. 2011. In March, that dropped 8.6 percent or $220.
That was a huge drop in incentives. Ivan Drury as an Edmunds analysis spoke about it.
“These latest numbers show by far the biggest February-to-March incentives decline since Edmunds started tracking in 2002,” Drury said. “The decline is mostly likely a result of a 26 percent month-over-month sales jump in subcompact and compact cars which typically have a much lower level of incentives compared to large trucks and SUVs.”
Will increased rewards hurt automakers again?
In a report entitled “The Impact of Customer Rebates and Retailer rewards on Manufacturer Profitability and Sales, ” a team of researchers presented a statistical analysis that suggested that fixed production and labor costs for Detroit’s Large Three (GM, Ford Motors, Chrysler) are the same whether they produced as several vehicles as possible or stood idle part of the time. There was overstock and more incentives since the Large Three produced more than they needed to. There were lots of sales with these incentives. They were often at a loss though.