According to John Krafcik, CEO of Hyundai Motor America, during the Chicago Auto Show, the first shots have already been fired in what could be an escalating "price war" between major automakers in the U.S. market.
Krafcik added that there is “a lot of pressure” to deliver sales results. Increased discounting on new car sales would benefit consumers, but could chip away at the profitability that many investors had projected for automakers at the start of the second year of a still-developing recovery in U.S. auto sales.
Krafcik said General Motors Co. had started the latest round of price-cutting and Toyota Motor Corp. quickly responded with its own price cuts in February 2011. Until the start of 2011, automakers had resisted the urge to increase spending on rebates and low-rate financing to lure car buyers.
Many analysts depended on a more disciplined approach to pricing holding during this upswing, especially after Detroit-based automakers used the industry's recent crisis to shutter plants, slash costs, and renegotiate labor deals.
Aggressive consumer discounts have added to volatile boom-bust cycles for the industry over the past decade and eroded the resale value of vehicles, especially from Detroit manufacturers, who have had to compete on price. [via autonews - sub. required]