Detroit's Big Three are battling sagging vehicle sales by extending and ramping up consumer incentives, deals some analysts predict will get sweeter this summer as automakers look to move more trucks.
Chrysler LLC this week extended its $2.99 gas guarantee on most of its 2008 lineup through the end of July and added $1,000 rebates on four SUVs — Chrysler Aspen, Dodge Durango, Jeep Grand Cherokee and Jeep Commander.
Ford Motor Co. is extending its employee pricing on F-series pickup trucks until July 7.
And General Motors Corp. will continue its zero percent financing for 72-month offers through the holiday weekend.
The GM incentive, introduced at the end of June, is credited with staving off an even deeper decline in June sales for the Detroit automaker and the industry as whole. GM's sales were down 18.2 percent in June. Industry-wide sales slid 18.3 percent.
“Incentives will continue on an upward trend compared to the last couple years,” said Bob Schnorbus, chief economist for J.D. Power & Associates. Car companies, he added, “must do everything they can to stimulate sales, and it won't be an easy sell because consumers' ability to buy has really been hammered.”
Rebates, financing deals and special offers such as Chrysler's gas guarantee — which locks in gas prices at $2.99 a gallon for three years — will pull some buyers off the fence, Schnorbus said.
But it will be tempered, some analysts said, and not likely to reach the record high levels of a few years ago, because there are fewer new vehicle buyers in the floundering economy, which also challenges automakers.
The best deals will come on slow-selling SUVs and pickup trucks. Rebates on cars, especially hot-selling compact and hybrid models, are expected to remain small, which has helped curtail overall incentive spending.
Last month, carmakers spent an average of $2,812 per vehicle on incentives — a 4.4 percent hike from a year ago, said Autodata Corp. Manufacturers spent big on trucks, up 14.8 percent from a year ago, and cut spending on cars, down 2.1 percent.
“The companies are getting much more disciplined in spending money where they need to … and not on small cars,” said Jesse Toprak, chief analyst at Edmunds.com. “On a struggling large SUV, you might see incentives hit $6,000 or $7,000.”
That compares to a few years ago when automakers blanketed incentives across their lineups.
” You won't see fire sales on small cars because consumers have an appetite for those,” Ford sales analyst George Pipas said. “Across the industry, larger models that are not selling will continue to see mega rebates and mega low interest rates.”
GM and Chrysler executives said their June incentives were successful and prevented a bad June from being even worse.
Despite auto sales hitting their lowest levels in more than a decade in June, incentive spending is not expected to match the peak levels seen in 2004 and 2005.
In June 2005, when GM first introduced “employee pricing for everyone,” automakers spent an average of $3,269 per vehicle on incentives; $459 more than last month.
The lack of buyers is helping hold back incentive growth today.
“At this point for car buyers, you're in the market or your not,” said Todd Turner, president of California-based Car Concepts Inc. “Automakers are wise to show some restraint because they won't attract many new buyers so they'll just be giving away $1,000 to someone who would have bought the car anyway.”
Martin “Hoot” McInerney, who operates several dealerships including Star Lincoln-Mercury in Southfield, said as money gets tight for financially struggling automakers, they are less willing to spend on incentives.
“They'd like to give more, but they can't — there is already $6,000 on the hood of an F-150,” he said. “I've put my own money and gas cards into deals. The dealers got to because the factory can't anymore.”
