Falling Car Prices Spell Trouble for Automakers
Now that sales of new cars are slowing down, automakers and their dealers are starting to lop thousands of dollars off prices — a tactic that has led to industry troubles in the past.
In Stafford, Va., Leckner Nissan has a black 2017 Nissan Altima SV it is selling for as little as $21,593 — $7,195 below sticker price. “The market is slowing down and now inventories are building up, so the manufacturers are putting money out to move these cars,” said Wes Lutz, owner of Extreme Dodge in Jackson, Mich. In April, sales declined 4.7 percent, to 1.4 million cars and light trucks. Forecasters expect sales of about 17.2 million vehicles in 2017, down from last year’s record of 17.5 million. Cash discounts are one of the first tactics automakers turn to when they want to lure more shoppers. But big cuts for long periods can eat into profit margins and lower the value of used cars. A decade ago, General Motors offered employee pricing to all customers, and other automakers matched the deal. Such discounting helped push the industry into crisis, and G.M. into bankruptcy. Mr. Lutz’s franchise is offering a gray 2017 Dodge Challenger coupe for $27,900 — $6,680 under list price — thanks to a program that Fiat Chrysler Automobiles ran allowing dealers to discount certain models by up to 20 percent. “This is a great deal. Consumers win. Dealers win. I can sell a lot of cars if I have $7,000 discounts,” he said. “It’s not so great for the manufacturers, though.”
Trucks and S.U.V.s are also being offered at bargain prices. Bomnin Chevrolet in Miami is selling a white 2017 Colorado pickup truck for $19,281 — $4,854 below sticker price, a saleswoman confirmed. It will lower the price by $1,000 more for those who finance through the dealership. Tom Maltic, a retiree living near Jackson, Mich., has just started shopping for a used pickup truck. “But now I’m thinking maybe I should buy new,” he said. “If there are some really nice discounts, maybe I pay a little bit more but I don’t have to worry if something is going to break down.” To manage the flow of unsold cars, General Motors and Ford Motor Co. have recently cut shifts at a few plants in the United States. Fiat Chrysler has stopped making compact and midsize cars. But some 3.5 million vehicles that were leased for the last two or three years will be returned this year. Sometimes consumers can choose between a new car and a two-year-old model that has been driven just 20,000 miles and is selling for half the price. Michelle Krebs, a senior analyst at Autotrader.com, said the current wave of cuts so far are limited to certain models, or certain regions. She added, “So I don’t see this as the sins of the past.” G.M. and Ford continue to rack up big profits, underpinning that view. But Toyota Motor Corp. said it lost money in North America in the quarter that ended March 31, its first loss in the region in five years. One of the reasons it cited: rising sales incentives.