Fall­ing Car Prices Spell Trou­ble for Au­tomak­ers

Honolulu Star-Advertiser - - BUSINESS - NEAL E. BOUDETTE

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.

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