The great automotive rebate war just keeps getting bloodier, according to a May 31 story by Joe Miller and Susan Carney in The Detroit News.

With car and light truck sales expected to be down once again in May, Detroit's automakers are desperately enticing buyers with lucrative -- and for the manufacturers, expensive -- incentives.

Whether it's no-interest financing on Lincolns and Buicks, $300 worth of free gas for buyers of Chrysler or Dodge minivans, $1,500 cash-back offers on once hot-selling sport-utility vehicles and full-size pickup trucks, or getting out of a GM lease early with no penalties, competition of the fierce, take-no-prisoners variety is the name of the game.

Average incentives are $2,698 at Ford; $2,814 at DaimlerChrysler; and $2,741 at GMwith an industry-wide average of $2,619 (Source: CNW Marketing/Research, Bandon, Ore.)

General Motors Corp., starting Friday, will offer select customers the opportunity to get out of their current lease early and with no mileage or other penalties, as long as they buy another new GM vehicle.

Even loyal Mercedes-Benz customers can get $1,400 toward the purchase of a new Mercedes E-class luxury sedan.

The proliferation of rebates is making it a buyer's market. With new-vehicle incentives averaging $2,619 per vehicle in the second half of May, up 38 percent from a year ago, according to CNW Marketing/Research Inc., the price tag for automakers could be as much as $3.9 billion in incentives in May alone.

With so much money being thrown at them, some shoppers are driving hard bargains and playing dealers off on one another.

Still, even with attractive rebates and lease deals, analysts expect industry sales to dip again in May, with Detroit's Big 3 -- GM, Ford and DaimlerChrysler AG's Chrysler Group -- taking the biggest hits. They also expect the huge price tag of the expensive rebates to cut further into the three Detroit automakers' already shaky profits for 2001.

The rebate battle also is upsetting some dealers, who say the short-term deals are not only eroding the brand equity of some vehicles but driving a wedge between themselves and customers.

Last year, Chrysler, hoping to save money and betting that the industry would follow its lead, pulled out of the rebate war. But the automaker quickly jumped back into the fray when it began losing ground to the competition. Since then, no automaker has been willing to be the first to cut incentives again.

As a result, fewer customers are loyal to a single vehicle brand. Consumers are basically waiting for the next incentives, according to industry analysts.

May sales, which will be announced Friday, could prompt even bigger rebates, according to auto industry analysts. May sales for GM, Ford and Chrysler are expected to fall well short of last year's record pace. Analysts also expect the three automakers to continue to lose ground to Japanese, Korean and European brands.

Merrill Lynch & Co. is forecasting a 5 percent sales decrease for GM in May, 10 percent for Ford and 10 to 12 percent for Chrysler. Merrill Lynch expects the combined sales of other automakers to rise 4 percent. Credit Suisse First Boston has GM down 6 to 8 percent and both Ford and Chrysler down 7 to 9 percent.

For a list of current cash rebates and reduced-rate financing plans for new vehicles, visit http://detnews.com/autos/deals.html.

0 Comments