Edmunds.com's monthly True Cost of Incentives (TCI) report takes into account all of the manufacturers' various United States incentives programs, including subvented interest rates and lease programs, as well as cash rebates to consumers and dealers. To ensure the greatest possible accuracy, Edmunds.com bases its calculations on sales volume, including the mix of vehicle makes and models for each month, and on the proportion of vehicles for which each type of incentive was used.
The industry's aggregate incentives spending totaled a record $5.3 billion in July. Domestic manufacturers spent $4.33 billion or 81 percent of the total cost, Japanese manufacturers spent $653 million or 12 percent, European manufacturers spent $245 million or 5 percent, and Korean manufacturers spent $137 million or 3 percent.
"Some automakers are now implementing a 'value pricing' strategy to help to reduce this excessive cost," remarked Dr. Jane Liu, vice president of data analysis for Edmunds.com. "However, it may not work as well as they'd like, since many consumers are programmed to expect incentives and may not even notice that sticker prices have been lowered. Automakers in that situation may be forced to offer incentives that drop prices even further."
Overall, combined incentives spending for domestic Chrysler, Ford, and General Motors nameplates averaged $3,942 per vehicle sold in July, up $113 from June 2005. Chrysler decreased incentives spending $73 to $3,623 per vehicle sold in July. In the same period, Chrysler's market share increased .2 percent to 13.3 percent. Ford increased incentives spending by $688 to $3,876 per vehicle sold in July while its market share increased 3 percent to 18.9 percent. General Motors decreased incentives spending by $56 to $4,135 per vehicle sold in July while its market share decreased 3.4 percent to 28.7 percent. The combined market share of the Big Three was 61 percent in July, down .2 percent from June.
From June to July, European automakers increased incentives spending by $447 to an average of $2,382 per vehicle sold; their market share slid .1 percent to 5.8 percent. Japanese automakers increased incentives spending by $189 to a record high average of $1,236 per vehicle sold; their market increased 1 percent to 29.3 percent. Korean automakers increased incentives spending by $99 to an average of $1,945 per vehicle sold; their market share decreased 0.3 percent to 3.9 percent.
Among vehicle segments, large SUVs continued to offer the highest average incentives, $5,164 per vehicle sold, while sports cars had the lowest average incentives per vehicle at $995. Looking at incentives expenditures as a percentage of MSRP for each segment, large trucks were the highest, 12.5 percent, while sports cars were the lowest, 3.4 percent.