Industry worried Nissan discounts may lead to US price war

Article by Anita Panait, on June 18, 2013

The auto industry is becoming worried that Nissan Motor Co.’s move to cut prices of its products and boost incentives could lead to a price war between carmakers in the United States. Nissan has trimmed prices of seven models and have hiked incentives in a bid to increase sales as well as market share in the US.

The carmaker’s strategy so far has proven to be effective, as it managed to post a 25-percent surge in sales in the US in May 2013. Nissan posted a 41-percent surge in sales of its Altima family sedan, which price was trimmed by $580. Nissan’s move has also allowed it to increase its US market share by a full point to 7.9 percent in May 2013. While Nissan’s sales and market share gain is something the carmaker is enjoying, the industry is viewing it with concern.

Nissan’s growth is an indication of Japanese carmaker taking advantage of the weakening yen. The currency has depreciated by around 15 percent since Oct. 31, 2012, giving Japanese carmaker an extra $1,500 per car leeway that they could use either to trim prices or include more features in their units, according to Morgan Stanley.

Michelle Krebs, an analyst with auto researcher Edmunds.com told Bloomberg that Nissan's marketing moves seems like “a scorched earth policy” of going for market share and sales volume “at seemingly all costs."

Nissan’s move is also pressuring Detroit to maintain its stance on discounting. In the last decade, Detroit’s collapse was attributed partly to its over-dependence on rebates and price cuts. Forerunners of General Motors and Chrysler Group even had to be bailed out by the federal government, while Ford had to go a self-financed reorganization. [source: automotive news - sub. required]

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