It follows the same pattern every month: automakers announce another sales drop, and then a new round of price cuts they hope will pull buyers back into showrooms. One month later, they repeat. The details vary slightly. Sometimes they'll try a gimmick, like calling the price drops "employee discounts." Sometimes they'll offer cash back rebates. Sometimes they'll cut interest rates completely, offering zero-percent loans. But the result is always the same: another sales decline.
This week, we're at the beginning of another cycle.
"As sales by Detroit's automakers plummeted in January to the lowest levels in decades," Edmunds Inside Line reports, "General Motors announced a new round of incentives that run through March 2." The gimmick this time? They're calling it the "President's Day Sale," even though it lasts 30 days. For all 30 days of President's Day, shoppers considering a GM car "can choose zero percent financing for up to 60 months, 1.9 percent loans for 72 months or cash back ranging from $1,000 to $2,000" on most GM models.
These offers are, in most cases, better than what GM offered last month, when the automaker saw a 49 percent sales drop.
Chrysler has extended its "Employee Pricing Plus Plus" sale (yes, you read that right). Kicking Tires explains, "The sale's name refers to new Chrysler, Dodge and Jeep vehicles getting a reduced sticker price, or employee price, plus a cash-back rebate and 0% financing for up to 48 months for qualified buyers." When it was first announced near the end of January, the sale had no end date. Now, Chrysler has announced that it will be "extended" through March 2.
With the same deal on the table near the end of January, Chrysler saw a 55 percent sales decline.
The story is the same across the industry. The Detroit Free Press reports, "The average incentive on vehicles sold in the United States last month rose 5.1% to $2,691, according to Autodata Corp., a private firm that estimates incentive spending." Foreign automakers are locked in the same cycle. "European brands showed an increase in discounts of 16% to an average of $3,119 per vehicle" in January, according to the Free Press, while Asian brands "ramped up their incentives by 38% compared with the same month a year ago."
Despite all of those incentives, industry-wide sales fell to a new low. Business Week reports, "the first month of 2009 Americans bought cars at an annualized rate of 9.57 million, the worst level for January-typically a weak month-since 1963."
Will anything sell cars in this market?
Apparently, one thing will. Ask Hyundai.
Edmunds Inside Line reports, "Hyundai got off to a quick start in January, announcing that it sold 24,512 vehicles, a 14 percent increase over 2008. The increase was attributed to the Hyundai Genesis' naming as 2009 North American Car of the Year and the rollout of the Hyundai Assurance program, which kicked off in January and allows consumers to return their new Hyundai if they lose their jobs."
Subaru also reported a sales increase in January, which the company attributes to the introduction of a new Forrester SUV, a popular choice among those looking for a fuel-thrifty hauler that's sure-footed in the winter and not too expensive.
But it's Hyundai's offer that should get Detroit's attention. Hyundai sales were up almost across the board - nearly every Hyundai model saw a sales increase in January. Forbes reports, "Consumers flocked to showrooms after the company allowed buyers to return vehicles for a refund within one year if they lost their primary income stream--an assurance many appeared to need at a time when the U.S. economy continues to shed hundreds of thousands of jobs a month."
The innovative offer actually wasn't hard for the company to put together. Forbes explains, "Hyundai has paid a fee to insurance companies, which will buy back the cars from those laid off. One-year used cars typically sell at a 30% discount to the price of new cars, but Hyundai will end up losing less than that on cars that are returned as a result of the deal. Hyundai has chalked up the insurance cost as a marketing expense."
Is Detroit listening?
The incentive cycle does mean that dozens of cars are surprisingly inexpensive now. Research the best car deals with U.S. News' car rankings and reviews
