Slowing US sales force Japan carmakers to relook discounts

TOKYO: A second year of slowing growth in the US auto market is forcing Japanese carmakers to look beyond discounts to grow market share and focus more on boosting profitability in their largest market.

Global carmakers have been battling for dominance in the world’s number two market as annual sales continue to slide from a record high 17.55 million vehicles in 2016.

Many have resorted to price cuts to boost market share in the growth segments for SUVs and pick-up trucks, while also shoring up sales in the struggling sedan segment.

The costs of US discounting has cut into operating profits at most Japanese carmakers, including Toyota Motor Corp, and Mazda Motor Corp, where

With the pie getting smaller, you’ll probably see incentives continuing on the most profitable vehicles as well as where automakers do not want to lose their market share.

North American earnings are poised to fall for the third straight year this year. Nissan Motor Co’s profits in the region are on track to fall for the second consecutive year.

In an interview earlier this month, Nissan CEO Hiroto Saikawa said that the days of its high incentives would end once the carmaker unloads inventories of 2017 models by the end of the financial year in March, as big discounts were unsustainable in a market where growth had stalled.

“Competition for sales will be difficult in this environment, and improving the quality of sales will be important. We can’t compete only with incentives. We need to raise our marketing and brand value,” he told Reuters.

After focusing on growing US sales aggressively since 2011, Nissan is putting the brakes on that strategy, though it is looking to grow strongly in China.

Figures from data and analytics company J.D. Power show that in 2017, Nissan offered incentives averaging 16.7 per cent of the price of each vehicle sold - higher than an industry average around 10.6 per cent.

Mazda, one of Japan’s smaller carmakers, increased its spending on marketing promotion per car by 31 per cent last year, and acknowledged that spending to increase sales can only go so far.

“Raising incentives beyond these levels won’t necessarily translate into higher sales. We need to grow sales by promoting our products better,” managing executive officer Yasuhiro Aoyama told reporters at a results briefing earlier this month.

“With the pie getting smaller, you’ll probably see incentives continuing on the most profitable vehicles as well as where automakers do not want to lose their market share,” said Brad Korner, general manager of Cox Automotive Rates and Incentives. — Reuters

Brad Korner, general manager of Cox Automotive Rates and Incentives.