The Chrysler Group will cut the prices of its redesigned 2008 minivans by as much as $3,585 even as it adds more features, in a bid to eliminate hefty discounting and grab new buyers.
Known as “value pricing,” the strategy helps automakers do away with profit-eating incentives and puts vehicle prices closer to the actual amount consumers pay .
Chrysler hopes the more affordable prices, coupled with 35 new features, will maintain its lead in the key minivan segment.
The Dodge Grand Caravan — the No. 1 selling minivan in the United States — will start at a manufacturer's suggested retail price of $22,470, plus a $730 destination charge. That's $1,950 less than the current model.
The Chrysler Town & Country will go for $23,190, or $3,585 less than the 2007 model.
The new minivans arrive at showrooms in September, the automaker said Thursday.
Shifting the suggested retail price closer to the transaction price is a step in the right direction, industry insiders say.
“Anytime you offer more bang for the buck, it's a good move,” said Alex Rosten, manager of pricing and market analysis at Edmunds.com.
The benefit of value pricing is that it can improve the residual value of the vehicle (what it sells for used), and thereby the brand image, said Tom Libby, senior director of industry analysis at J.D. Power and Associates.
“The residual value is an area that the domestics all have to improve on to become more competitive with Honda and Toyota, so from that standpoint, it makes a lot of sense,” Libby said. “The domestics have lagged behind the Japanese for many years, and it's hurt them for many years because it forces them to have higher lease payments that just reduces the appeal of their products.”
But the automaker has to refrain from using lower sticker prices as the main strategy for maintaining its minivan lead, Libby said. “They have to guard against selling purely on price. When you're selling purely on the deal, then you're not selling on the strength of the product. You're not selling the benefits of the product, and that's not the image you want.”
Reducing incentives and ensuring that its price point and brand is competitive is especially critical for Chrysler as it takes on chief rivals, the Toyota Sienna and Honda Odyssey, in the minivan segment.
Sales are down
Chrysler invented the minivan in the 1980s and hopes to exploit the defection of Ford and GM from the segment. To date, Chrysler has sold some 12 million minivans in the United States and globally. Next to the Dodge Ram pickup, minivans are the automaker's biggest sellers.
But sales have been waning.
In 2006, Chrysler sold 360,000 minivans. Last month, Caravan sales fell 57.4 percent, and the Town & Country tanked by 59.1 percent.
Chrysler expects its 2008 models to jump-start sales, said Steven Landry, executive vice president for North American sales, global marketing, service and parts.
He added that even though GM and Ford aren't selling minivans anymore, overall sales are expected to stay steady at about 1 million units a year. Landry said the automaker “plans to continue its (segment) leadership.”
Ron Kutz of Dallas Dodge Chrysler Jeep believes value pricing is a good idea theoretically, but not when it comes to selling domestic vehicles.
“It's admirable that we try to get this done in the domestic business,” Kutz said. “But on the showroom floor, it is the discount that makes the domestic car go away — the deal.”
Still, the lower sticker prices on the new minivans, plus their nifty features, could be enough to pump up sales, Kutz said.
“It's going to be the hottest thing for Chrysler since the PT Cruiser,” he said. “There still is a minivan market, and Chrysler still dominates the minivan business. And these vehicles are going to have the things that people want.”
The 2008 minivans will have a new 4.0-liter V-6 engine with a six-speed transaxle — a minivan first, Chrysler said. All-row side curtain air bags and electronic stability control will be standard.
The family haulers also will include Chrysler's latest innovation: Swivel n' Go second-row seats that rotate 180 degrees to face third-row passengers.
The new minivans will bring stiff competition to the market, dealers say, noting that the lower prices will make Chrysler's minivans the second-most affordable, after the Kia Sedona.
“We're going to be more competitive in the market because we'll have the newest minivans in the market,” said John Schenden of Pro Chrysler-Jeep in Denver. “It's going to get us back to higher levels of volume than we've had in recent months.”
Production of the new minivans began earlier this month at Chrysler's Windsor factory and is scheduled to start at the St. Louis plant in early September.
