Ford has reduced incentives on its F-150 pickup this year, the
company says. But it's boosting them elsewhere -- and archrival
GM is responding in kind. Source: Ford.
It's a summer sales battle -- with a twist.
both launched big promotional campaigns -- complete with fat
incentives -- well in advance of the traditional Labor Day sales
Both Ford and GM's Chevrolet brand are making these big moves
to try to boost slowing U.S. sales.
But is this the kind of war that nobody can win?
America's top-selling brands have lost ground this year
It's clear why Ford and Chevy officials are feeling the need to
boost sales. Through July, year-to-date Chevrolet sales are up
just 2.1%, while Ford sales are are actually down 0.8%.
They trail the U.S. market's overall 5% gain over the same
period -- and that means that both Chevrolet and the Ford brand
have lost market share this year.
Officially, neither automaker is worried. Ford said that it
has lost some ground in the huge full-sized pickup market because
leading up to the introduction of its all-new 2015 F-150. That's
not a problem, according to the company, because it has
reduced its pickup discounts
to help manage demand.
Incentives on the new-for-2014 Chevy Silverado are much lower
than those GM offered on the 2013 model. But they started rising
after competitive pressures hurt sales. Source: General
Meanwhile, Chevrolet has increased sales, albeit just a
little, despite GM's massive recall scandal. And while sales of
its Silverado pickup are down slightly versus last year, GM has
said it's selling more of the most profitable variants.
Both brands have seen
good gains in SUV sales
as more buyers are favoring new "crossover" SUVs over cars. Ford
and GM also
reported good profits
in North America for the last quarter (not counting
the costs of GM's recalls
, of course), so they're clearly doing something right.
So why is a little sales battle worthy of concern?
Are U.S. auto sales running out of steam?
The concern is that after several years of big growth, U.S. auto
sales might be peaking. One indicator is an increase in
incentives, as automakers find they need to offer more discounts
to keep sales growth going.
Over time, those discounts can cut into automakers' profits in
a big way. That's the concern: That Ford and GM could be heading
in the direction of trading profits for sales.
So far, the discounts aren't outrageous. As noted, North
American profits at both Ford and GM were strong last
But the trend is worrisome.
Chevy's incentives are actually down this year -- the brand
has several strong models that were new last year, and it has
significantly reduced discounts on vehicles such as the Silverado
and the Impala. But after initially making
very deep cuts in its discounts
on the new-for-2014 Silverado, GM has had to boost them to
Meanwhile, Ford's overall incentives are up 12% this year,
according to Autodata data reported by
, despite the automaker's reduction in discounts on the F-150
It's not just Ford and Chevy
Ford latest round of offers, launched at the end of July, include
interest-free financing for 72 months on most of its models (the
F-Series pickups, Ford's commercial vans, and the Mustang are
Critics have raved about the new Chevy Impala sedan. It's one
of the big stars of GM's product renaissance, and it has
sold very well. But even the Impala is getting interest-free
financing deals now. Source: General Motors.
GM responded last week with a slew of interest-free financing
deals on Chevys, along with a "no payments for 90 days" offer on
several models -- one-upping Ford by including all Silverado
pickups and the Camaro in its offers.
In and of themselves, these offers are no big deal -- good for
buyers, but not a big threat to the auto giants' bottom lines.
And one could argue that Ford and GM are simply meeting the
After all, other competitors are also stepping up with
is offering interest-free financing for 60 months on several
hot-selling models, including the Prius and the just-refreshed
has also stepped up with free-financing offers on many
But again, it's the trend that's worrisome. If U.S. auto sales
really are peaking, that's bad news for profits at Ford and GM --
and a warning sign for shareholders. Stay tuned.
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Will Ford Motor Company and Chevrolet Both Lose
This Discount War?
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