Jump to content

Detroit automakers outpace industry gains

Recommended Posts

Detroit automakers outpace industry gains



While sales of cars and trucks in the U.S. continue to be more sluggish than expected, automakers -- especially the Detroit Three -- are enjoying the largest increase in average transaction prices in more than five years.

Industrywide, consumers spent an estimated average of $29,217 on a new car or truck from January through May -- an increase of $1,057, or 3.7%, compared with last year, according to estimates provided by Edmunds.com. Edmunds' estimate is based on a sampling of data from about 40% of U.S. dealers.

But, the Detroit Three are outpacing the industry's gains -- giving the automakers an opportunity to improve profit margins. Edmunds says average transaction prices increased 5.5% for Chrysler, 4.3% for Ford and 3.8% for General Motors.

Thomas King, senior director at J.D. Power and Associates, said the recent financial collapse, which helped the automakers restructure and close extra plants, helped automakers reduce production and cut incentives.

"In the past, you had manufacturers focusing a little more on improving volume and reducing prices to get that volume," King said.

Now, King said automakers have embraced a more disciplined approach that represents a fundamental "change in the dynamic of the industry."

New technology

While the underlying reasons for the transaction increases are somewhat different for each automaker, they generally include inventory reductions, reduced incentives, a demographic shift among buyers this year and consumers deciding to buy new technology and options.

According to WardsAuto.com, GM had a 56 days' supply of inventory at the end of June, while Ford and Chrysler stood at 59 days, which is lower than the historic averages for domestic automakers. Generally, a 60-day supply of inventory is considered to be optimal.

That has helped the Detroit Three lower incentives by an average of 4.5%, or $156, per vehicle this year.

Toyota's prices, meanwhile, have increased 4.1% through May, according to Edmunds.com. That happened even as the automaker boosted incentive prices by 22.3% to attract buyers despite its recent recalls, according to Autodata.

Different consumers

Also, all automakers are seeing average transaction prices increase this year because of a change in the type of consumers that are buying cars, said Jack Nerad, market analyst for Kelley Blue Book.

Because of the economic collapse, Nerad said the only consumers who are buying cars are those who are the most economically secure and with the best credit. Those buyers also are likely to be comfortable buying more expensive cars loaded with options.

Ford has been working for several years to capture those buyers by reducing the number of options it offers while doing a better job of marketing the most desirable options, said John Felice, general marketing manager of the Ford Division.

For example, Ford reduced the number of combinations and options it offered on its Ford Mustang from nearly 350,000 to fewer than 10,000 between 2008 and 2010.

"We just had too much complexity," Felice said.

On Thursday, Ford said its 2011 Ford Fiesta would include options such as $322 illuminated scuff plates and a $136 illuminated shift knob.

At GM, fewer brands and popular new products are lifting prices. The automaker has shed four of its eight brands in the past year and products such as its Chevrolet Equinox, GMC Acadia and Buick Enclave midsize crossovers have been big hits, giving the company the highest average transaction price of any full-line automaker.

"Hot products that are in tight supply are pretty much the story," said GM spokesman Tom Wilkinson. "Economics 101."



Link to comment
Share on other sites

Join the conversation

You are posting as a guest. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

  • Create New...