Carmakers reduced spending on incentives for U.S. customers by 19% in May 2011

Article by Christian Andrei, on June 2, 2011

Researcher Autodata Corp. said that carmakers lowered incentive spending for U.S. customers in May by 19% to an average $2,303 per vehicle. This is the lowest levels ever reported in the last five years.

Autodata said that Ford Motor Co.'s average spending on discounts and promotions fell by 20% to $2,432, compared to the previous year. Meanwhile, General Motors Co. cut incentives by $648, or 17% from the prior year, to an estimated $3,085 for each vehicle.

Chrysler Group LLC reduced its spending by 18% to $3,002. Autodata said that industrywide light-vehicle sales recorded a seasonally adjusted annual rate of 11.8 million last May. This is the lowest sales recorded since September. It came lower than the 12.1 million pace, which is the average estimate of 11 analysts that Bloomberg surveyed.

According to GM, major cuts to incentives have prompted buyers to defer purchases. Jesse Toprak, vice president of industry trends at TrueCar.com, said that the automakers “didn't want to be the one outlier spending at normal levels” when the others were reducing their incentives.

Autodata said that what resulted from this scenario was “poor retail sales." Even Japanese brands cut spending. Toyota’s incentives fell by 27%, or $515, to an estimated $1,408 per vehicle. Honda Motor Co. cut incentives to $1,513, 29% lower than the previous year. Nissan Motor Co. cut its discounts by 28% to $2,247.

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